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Deep Rock Doctrine

deep rock doctrine n

[from Deep Rock , a debtor corporation found to have been used for fraudulent transfers to its parent corporation in the Supreme Court case Taylor v. Standard Gas and Electric Co. (Deep Rock ), 306 U.S. 307(1939)]
: a doctrine holding that the claim of a stockholder and esp. a stockholder with controlling interest who makes a loan to his or her own corporation will be subordinated to the claims of outside creditors if the corporation is deemed undercapitalized



Source: Merriam-Webster's Dictionary of Law ©1996. Merriam-Webster, Incorporated. Published under license with Merriam-Webster, Incorporated.