Midterm Exam coverage for Corporation Law is Section 1-58 of the RCCP.

  
Study the following review questions. 
 
1. Explain the Trust Fund Doctrine.
ANSWER: The trust fund doctrine means that the capital stock, properties and other assets of a
corporation are regarded as equity in trust for the payment of corporate creditors. Stated simply,
the trust fund doctrine states that all funds received by the corporation in payment of the shares of
stock shall be held in trust for the corporate creditors and other stockholders of the corporation.
Under such doctrine, no fund shall be used to buy back the issued shares of stock except only in
instances specifically allowed by the Corporation Code