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Pari passu is aLatin phrase that literally means "with an equal step" or "on equal footing". It is sometimes translated as "ranking equally",[1] "hand-in-hand", "with equal force", or "moving together", and by extension, "fairly", "without partiality".[2]
In legal terms, pari passu means "on equal footing." It refers to creditors, claimants, or shareholders receiving equal treatment without preference. Common in bankruptcy and finance, it ensures proportional distribution of assets, rights, or obligations among parties.[3]This term is commonly used in law.Black's Law Dictionary (8th ed., 2004) definespari passu as "proportionally; at an equal pace; without preference".
In inheritance, apari passu (per capita) distribution can be distinguished from aper stirpes (by family branch) distribution.[4]
For example, suppose atestator had two children A and B. A has two children, and B has three.
This term is also often used in thelending area and inbankruptcy proceedings, wherecreditors are said to be paidpari passu, or each creditor is paidpro rata in accordance with the amount of his claim. Here its meaning is "equally and without preference".There have been cases where decisions were based on different interpretations of the term.[5][6]
In theEuropean Union, as the result of theGreek government-debt crisis, a retroactivecollective action clause passed by the Greek government with the support of theECB andIMF, enabled the debtor (who also controlled the courts) to impose a 70% loss on the creditors, more than 75% of whom had voted in favour of the cut. In this case,pari passu means that all private-sector investors are equally treated.[7]
Ranking equally, meaning literally 'with equal step'.
