pari passu
Meaning. On an equal footing; ranking equally, without preference.
Used mainly in commercial and insolvency law, pari passu means that two or more claims or securities rank equally and are paid proportionately. If a company's assets are not enough to pay all creditors of the same class in full, each is paid the same percentage of its debt.
A pari passu charge is a charge shared equally by several lenders over the same asset, as opposed to a first and second charge. New shares are said to rank pari passu with existing shares when they carry the same rights. The phrase is often paired with pro rata: equal ranking leads to proportionate payment.
Example
The two banks held pari passu charges over the factory, so the sale proceeds were shared in proportion to their dues.
In Indian law
- s.53, Insolvency and Bankruptcy Code, 2016 (debts in the same class in the liquidation waterfall rank equally)
See also
pro rata · winding up · insolvency · mortgage