What is the difference between pro rata and pari passu?
In banking, pari-passu is typically used in the context of unsecured debt, which are bonds or loans not backed by collateral. Pro-rata refers to proportionally distributing profits and obligations, and pari-passu refers to the rank and seniority of the obligations — i.e., that they are “on equal footing.”
What is pari passu first charge?
Meaning of pari passu charge – Pari-passu is a Latin phrase, which means “equal footing”. “Pari Passu” charge means that when borrower company goes into dissolution, the assets over which the charge has been created will be distributed in proportion to the creditors’ (lenders) respective holdings.
How is pari passu charge created?
This type of charge created through common documents on behalf of multiple banks is called Pari-Passu charge. Law requires such charges on assets of the company to be registered at ROC within 30 days from the date of creation of charge or such extended time permitted by the ROC.
What is the effect of pari passu clause in the repayment of debenture?
With the presence of a pari passu clause, a debenture holder is assured of getting the repayment on pro rata basis between denture holders in case of insufficient funds or assets of the company.
What does pari passu basis mean?
equal footing
Pari-passu is a Latin phrase meaning “equal footing” that describes situations where two or more assets, securities, creditors, or obligations are equally managed without preference.
What is pari passu agreement?
Pari-passu is a Latin term that means “ranking equally and without preference.” Applied in a legal context, pari-passu means that multiple parties to a contract, claim, or obligation are treated the same, “ranking equally and without preference.”
What does 1st charge mortgage mean?
A first charge mortgage is the first mortgage which has been charged on a property and has first priority before any other mortgage or lending on the property. When a first charge mortgage is placed on a property it will usually have a time scale for repayment and the terms of the charge.
What is pari passu principle?
The pari passu principle means that all unsecured creditors in insolvency processes, such as administration, liquidation and bankruptcy must share equally any available assets of the company or individual, or any proceeds from the sale of any of those assets, in proportion to the debts due to each creditor.
What is pari passu clause in case of debenture?
A Debenture secures a loan using the borrower’s assets and all terms and conditions and warranties are recorded in the Debenture. Pari Passu means ‘equal footing’ thus, the purpose of the Pari Passu clause is to ensure that the security conferred by the Debenture will always rank equally to any other security.
What does pari passu mean in a loan agreement?
It is an important clause for creditors of a company in financial difficulty which might become insolvent. If the company’s debts are pari passu, they are all ranked equally, so the company pays each creditor the same amount in insolvency. The loan agreement usually frames the pari passu clause as either:
What does pari passu mean in insolvency law?
Pari passu is a Latin term that means ‘on equal footing’ or ‘ranking equally’. It is an important clause for creditors of a company in financial difficulty which might become insolvent. If the company’s debts are pari passu, they are all ranked equally, so the company pays each creditor the same amount in insolvency.
What do you need to know about pari passu?
Key Takeaways 1 Pari-passu is a Latin phrase meaning “equal footing.” 2 In finance, “equal footing” means that two or more parties to a financial contract or claim are all treated the same. 3 Pari-passu is common in bankruptcy proceedings as well as debts such as parity bonds in which each party gets the same amount.
How does pari passu apply to common stock?
In that sense, the shares are pari-passu. Pari-passu can apply to common stock shares, for example, so that each shareholder has equal rights to claims for dividends, voting rights, and the liquidation of assets. However, pari-passu does not apply to creditors such as banks.