Deep Rock doctrine

noun

: a doctrine holding that the claim of a stockholder and especially 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

Word History

Etymology

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)