pari passu

adverb or adjective
pa·​ri pas·​su | \ˈper-i-ˈpa-(ˌ)sü, ˈpa-ri-\

Definition of pari passu 

: at an equal rate or pace

First Known Use of pari passu

1567, in the meaning defined above

History and Etymology for pari passu

Latin, with equal step

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The first known use of pari passu was in 1567

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More Definitions for pari passu

pari passu

adverb or adjective

Financial Definition of 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.

Source: Investing Answers

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