Contract Glossary
Pari Passu
Definition
A Latin term meaning 'on equal footing.' In contracts, it means two or more parties or obligations rank equally — no one has priority over the others. Common in debt agreements and investment term sheets.
In Practice
If you're an investor and the term sheet says your shares rank pari passu with another investor's shares, you'll receive the same treatment in distributions, dividends, and liquidation. Neither investor gets paid before the other. Watch for exceptions — some agreements use pari passu language but carve out senior positions for specific investors.
Common in these contract types
Related terms
Frequently asked questions about pari passu
All lenders with pari passu status get treated equally. If the borrower defaults and assets are sold, the proceeds are split proportionally among pari passu creditors — nobody jumps the line. Secured creditors with senior liens still get paid first if their security interest predates the pari passu agreement.
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Create your contractThis content is for informational purposes only and does not constitute legal advice. For contracts with significant financial or legal implications, review by a qualified attorney is recommended.