In the situation of a public bond issuance (the company borrowing from anyone in the general public who chooses to lend the funds), there would be no one clear person who would be capable to monitor the loans on their own, and the investors would find it difficult to agree and communicate their agreement to the company to settle any problems with the loan repayments.
Therefore, they agree as a condition of their bond borrowing to appoint a financial institution, known as a "corporate trustee", to be the responsible party for monitoring compliance with the loan terms, acting in interests of the general public who have purchased the bond.
Another aspect of this service, which is often performed by a different party, is the distribution of the repayment from the company to the bondholders, this function is known as a "paying agent".
In fact, modern bonds often appoint many different financial institutions to have special roles, based on their area of expertise (such as corporate trustee with an expertise in bankruptcy who is only called in if the company stops paying back the bond).
[2] Corporate trust providers offer a wide range of services, which include but are not limited to: