Legal Definitions - pari passu

Pari passu is a Latin term that means "by equal step." It refers to the idea of treating things or people equally and without preference. In financial terms, it means that creditors or investors will receive their share of a company's assets or profits proportionally and without any preference given to one over the other.

For example, if a company goes bankrupt and has to distribute its assets to its creditors, they will receive their share pari passu. This means that each creditor will receive a portion of the assets that is proportional to the amount they are owed, without any preference given to one creditor over another.

Another example is in the case of preferred stock and common stock. If a company issues both types of stock, the dividends paid to each type of stock will be pari passu. This means that the dividends will be paid out proportionally to the number of shares held, without any preference given to one type of stock over the other.

These examples illustrate the concept of pari passu, which is about treating things or people equally and without preference. In financial terms, it ensures that creditors and investors are treated fairly and receive their share of a company's assets or profits in a proportional and unbiased manner.