Pari passu
Encyclopedia
Pari passu is a Latin
phrase that literally means "with an equal step" or "on equal footing." It is sometimes translated as "ranking equally", "hand-in-hand," "with equal force," or "moving together," and by extension, "fairly," "without partiality."
In law
, this term is commonly used jargon
. Black's Law Dictionary
(8th ed., 2004) defines pari passu as "proportionally; at an equal pace; without preference."
In inheritance, an in pari passu (per capita) distribution can be distinguished from a per stirpes
(by family branch) distribution. For example, suppose a testator had two children A and B. A has 2 children, and B has 3. The testator leaves his entire estate to his grandchildren in equal shares in pari passu, each grandchild would inherit one fifth of the estate. If the testator left his entire estate to his grandchildren per stirpes (by family branch), the children of A would share one half of the estate equally between the two of them, and the children of B would share one half of the estate equally between the three of them. The problem with an in pari passu distribution in the example given is that, let's assume A dies before B. On A's death a distribution could not be made to his or her children: they would have to await the death of B (B may have more children after A's death) before the share of the estate they are to take could be determined.
In finance
, this term refers to two or more loan
s, bonds
, classes of shares having equal rights of payment or level of seniority
. For asset management firms, the term denotes an equal allotment of trades to strategically identical funds or managed accounts.
This term is also often used in bankruptcy
proceedings where creditors are said to be paid pari passu, or each creditor is paid pro 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.
Latin
Latin is an Italic language originally spoken in Latium and Ancient Rome. It, along with most European languages, is a descendant of the ancient Proto-Indo-European language. Although it is considered a dead language, a number of scholars and members of the Christian clergy speak it fluently, and...
phrase that literally means "with an equal step" or "on equal footing." It is sometimes translated as "ranking equally", "hand-in-hand," "with equal force," or "moving together," and by extension, "fairly," "without partiality."
- passu is the ablative of the Latin noun passus, "step"
- pari is the ablative singularSingularA grammatical number denoting a unit quantity Singular may also refer to:* Gravitational singularity, a location where the quantities that are used to measure the gravitational field become infinite...
masculineMasculineMasculine or masculinity, normally refer to qualities positively associated with men.Masculine may also refer to:*Masculine , a grammatical gender*Masculine cadence, a final chord occurring on a strong beat in music...
(since it must grammatically agree with passu) of the adjectiveAdjectiveIn grammar, an adjective is a 'describing' word; the main syntactic role of which is to qualify a noun or noun phrase, giving more information about the object signified....
par, "equal". If it was nominative, "an equal step" it would simply be par passus.
In law
Law
Law is a system of rules and guidelines which are enforced through social institutions to govern behavior, wherever possible. It shapes politics, economics and society in numerous ways and serves as a social mediator of relations between people. Contract law regulates everything from buying a bus...
, this term is commonly used jargon
Jargon
Jargon is terminology which is especially defined in relationship to a specific activity, profession, group, or event. The philosophe Condillac observed in 1782 that "Every science requires a special language because every science has its own ideas." As a rationalist member of the Enlightenment he...
. Black's Law Dictionary
Black's Law Dictionary
Black's Law Dictionary is the most widely used law dictionary in the United States. It was founded by Henry Campbell Black. It is the reference of choice for definitions in legal briefs and court opinions and has been cited as a secondary legal authority in many U.S...
(8th ed., 2004) defines pari passu as "proportionally; at an equal pace; without preference."
In inheritance, an in pari passu (per capita) distribution can be distinguished from a per stirpes
Per stirpes
Per stirpes is a legal term in Latin. An estate of a decedent is distributed per stirpes, if each branch of the family is to receive an equal share of an estate. When the heir in the first generation of a branch predeceased the decedent, the share that would have been given to the heir would be...
(by family branch) distribution. For example, suppose a testator had two children A and B. A has 2 children, and B has 3. The testator leaves his entire estate to his grandchildren in equal shares in pari passu, each grandchild would inherit one fifth of the estate. If the testator left his entire estate to his grandchildren per stirpes (by family branch), the children of A would share one half of the estate equally between the two of them, and the children of B would share one half of the estate equally between the three of them. The problem with an in pari passu distribution in the example given is that, let's assume A dies before B. On A's death a distribution could not be made to his or her children: they would have to await the death of B (B may have more children after A's death) before the share of the estate they are to take could be determined.
In finance
Finance
"Finance" is often defined simply as the management of money or “funds” management Modern finance, however, is a family of business activity that includes the origination, marketing, and management of cash and money surrogates through a variety of capital accounts, instruments, and markets created...
, this term refers to two or more loan
Loan
A loan is a type of debt. Like all debt instruments, a loan entails the redistribution of financial assets over time, between the lender and the borrower....
s, bonds
Bond (finance)
In finance, a bond is a debt security, in which the authorized issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay interest to use and/or to repay the principal at a later date, termed maturity...
, classes of shares having equal rights of payment or level of seniority
Seniority (financial)
In finance, seniority refers to the order of repayment in the event of bankruptcy.Senior debt must be repaid before subordinated debt is repaid...
. For asset management firms, the term denotes an equal allotment of trades to strategically identical funds or managed accounts.
This term is also often used in bankruptcy
Bankruptcy
Bankruptcy is a legal status of an insolvent person or an organisation, that is, one that cannot repay the debts owed to creditors. In most jurisdictions bankruptcy is imposed by a court order, often initiated by the debtor....
proceedings where creditors are said to be paid pari passu, or each creditor is paid pro 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.
See also
- Statute of Bankrupts Act 1542Statute of Bankrupts Act 1542The Statute of Bankrupts was an Act passed by the Parliament of England in 1542. It was the first statute under English law dealing with bankruptcy or insolvency...
, introducing the pari passu principle for creditors of insolvent persons. Pari Passu means treat at par from the previous issue - Seniority (finance)
- List of Latin Phrases