pari passu

play
adverb or adjective pa·ri pas·su \ ˈper-i-ˈpa-(ˌ)sü , ˈpa-ri- \
Updated on: 26 Jul 2017

Definition of pari passu

:at an equal rate or pace

Origin and Etymology of pari passu

Latin, with equal step


Financial Definition of PARI PASSU

pari passu

What It Is

Pari-passu is a latin term that means "at an equal rate or pace." The term is often used in venture capital.

How It Works

Let's assume Company XYZ is looking for $10 million of capital. It contacts three venture capital firms, all of which are interested. VC Fund A agrees to invest $5 million; VC Fund B invests $2 million; and VC Fund C invests $3 million.

To negotiate the deal (and to protect themselves), the venture capital funds give Company XYZ terms sheets to sign. The term sheets state the equity that VC Fund A gets in Company XYZ will be pari-passu to all other series of equity, meaning that it will have the same rights and privileges as the equity that Company XYZ will issue to VC Fund B or C.

For most companies, common shares are pari-passu, meaning that they all rank equally and no one set of common shares has a higher claim to a dividend or assets than any other common shares.

Why It Matters

Pari-passu essentially means to treat all parties the same. Obviously, common shares and preferred shares are not equal; however, the shares within each class are usually pari-passu.


Seen and Heard

What made you want to look up pari passu? Please tell us where you read or heard it (including the quote, if possible).

Love words? Need even more definitions?

Subscribe to America's largest dictionary and get thousands more definitions and advanced search—ad free!

WORD OF THE DAY

smooth or hairless

Get Word of the Day daily email!

Love words? Need even more definitions?

Subscribe to America's largest dictionary and get thousands more definitions and advanced search—ad free!