Get Pari Passu

Pari Passu Charge refers to a type of security interest that gives all lenders an equal claim on the assets of the borrower. This means that if the borrower defaults on their loan, all lenders will be treated equally in terms of their right to recover their funds.

An example of pari-passu occurs during bankruptcy proceedings: When the court reaches a verdict, the court regards all creditors equally, and the trustee will repay them the same fractional amount as other creditors, and at the same time.

Pari-passu—Latin for “equal footing”—is a financing arrangement that gives multiple lenders equal claim to the assets used to secure a loan. If the borrower is unable to fulfil the payment terms, the assets can be sold, and each lender receives an equal share of the proceeds at the same time.

Pari-passu—Latin for “equal footing”—is a financing arrangement that gives multiple lenders equal claim to the assets used to secure a loan. If the borrower is unable to fulfil the payment terms, the assets can be sold, and each lender receives an equal share of the proceeds at the same time.

The pari-passu clause states that the loan issuer will have equal rights to repayment as all the borrower's other creditors. In essence, this means that if the borrower goes bankrupt and liquidates their assets, the lender can collect the money they're owed at the same time as other creditors.

a) PariPassu charge – Under this, the charge is shared by more than one lender in the ratio of their outstanding amount. The prior consent of the existing charge holder(s) is required by the company.

Pari-Passu charge: Pari-passu is a Latin phrase used in contract law that means “equal footing”. Thus pari passu charge means, having equivalent charge/ rights or say charge-holders have equal rights over the asset on which pari-passu charge is created.

Literally, this means “with equal step”, from pari, ablative of par, “equal” and passu, ablative of passus, “step”. That is to say, pari passu refers to things that are in same situation, things that rank equally.