Posted in Finance, Accounting and Economics Terms, Total Reads: 427
Definition: Pari- Passu
It is a Latin word which means in “equal amount”. It should be an equal share in anything being considered in the context.
Suppose a father writes a will with pari-passu condition to his kids P and Q. Then, both his kids will get an equal share in the wealth, irrespective of how his/her financial/personal condition is. Now if the P had 2 kid and Q has 5 kids, then P’s kids will each 1/4th share while Q’s kids will each get 1/10th share.
In financial perspective, this is applicable in the case of creditors and stock reissue. If we have to repay the creditors, all of them will have equal share and hence will be repaid the same amount irrespective of the money borrowed. When there is a reissue of stocks, the new stocks will also have the same rights as the initial stocks under pari-passu condition.