what is Pari Passu

Pari-passu is a Latin term that describes situations where multiple parties are treated equally and without preference, particularly in financial contexts such as bankruptcy proceedings, lending agreements, and asset management. Here's how it works: 1. **Equal Treatment in Bankruptcy**: - In bankruptcy, the pari-passu principle ensures that all creditors are repaid equally, without preference, from the assets of the insolvent company. This prevents any one creditor from being favored over another and promotes fairness among creditors. 2. **Financing Agreements**: - Pari-passu can also apply to financing agreements, where multiple creditors or investors have equal claims on an asset or security. This is common in syndicated loans or bonds, where the terms ensure that all parties have equal rights of payment. 3. **Startup Investments**: - In the startup world, pari-passu refers to the equal preferences of preferred shareholders in a company. It ensures that all preferred shareholders have equal rights to distributions from the company in the event of a liquidity event, such as a sale. 4. **Commercial Real Estate**: - In commercial real estate, pari-passu is used to describe distribution models where profits are divided pro rata among investors or creditors, with each party receiving an equal share of the available funds based on their investment percentage. Overall, pari-passu is a principle that promotes equality and fairness among parties in financial transactions, ensuring that no one party has a preference over another.