Pari Passu

Pari passu is a legal principle that means 'on equal footing' or 'without preference.' In various contexts, it reflects the idea that participants or creditors are entitled to equal treatment and distribution of assets without any priorities or preferential treatment among them.

The term originates from Latin, commonly used in English law and finance. Historically, it has evolved from principles governing the distribution of assets among creditors in insolvency cases.

In modern law, pari passu is frequently applied in bankruptcy and securities law, ensuring that all creditors have an equal claim to the assets of a debtor. It also appears in bond issuance, where it guarantees that all bondholders are treated equally in terms of payment distribution.

• In the event of a corporation's liquidation, all unsecured creditors will be paid on a pari passu basis, meaning they will receive equal shares of the remaining assets, proportional to their claims.
• In a multi-class debt structure, different classes of bonds might be issued pari passu to ensure that all bondholders are prioritized equally for payments.

• In re: O.P.M. Leasing Services, Inc. (1994)