Pari passu is a Latin term meaning "on equal footing." In finance and investment, it refers to different stakeholders having equal rights or claims in terms of payments, debt obligations, or liquidation preferences. When securities or creditors are ranked pari passu, it means they will receive equal treatment without preference over one another.
Where It’s Used
Key Concepts
Why It Matters
What does pari passu mean in startup funding?
In venture capital, pari passu means that all investors within the same funding round have equal rights to payouts in an exit or liquidation event.
How does pari passu apply in debt financing?
When multiple lenders hold pari passu debt, they share equal priority in receiving payments, meaning no lender has a senior claim over the other.
What is the difference between pari passu and senior debt?
-Pari passu: Equal ranking in repayment. -Senior debt: Gets paid before other debts or equity holders in a liquidation event.
Why is pari passu important for investors?
It ensures fair distribution of returns or repayments, preventing certain investors from receiving preferential treatment unless explicitly agreed upon in funding agreements.
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