shobana.v.mani (Asst company secretary) 25 September 2010

What does "parri passu in all respects" mean

Dear all,

what does "parri passu in all respects" mean. An unlisted public limited company at the time of issue of equity shares in the mid of the year, has issued it stating that " the new shares shall rank parri passu in all respects with the existing equity shares"

Does this mean that the new shareholders are entitled to get Dividend for the full year and not proportionate to their period of holding...

regards

shobana

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3 Replies

Hemant Agarwal (ha21@rediffmail.com Mumbai : 9820174108) 25 September 2010

1. Pari Passu = Equivalent in all respects.
Provided shares are issued, before book-closure.

2. New share shall be treated in Equivalence with old shares, for purposes of all benefits, i.e. for rights issue, bonus issue, dividends, gifts, premium etc....

logical example
a) xyz holds shares since last 5 years. He gets full dividend etc...
b) abc buys shares from market, just 7 days before book closure. He too gets full dividend etc...
Irrespective of period of holding.
c) proportionate to their period of holding NOT APPLICABLE under Co. Act.

Keep Smiling .... Hemant Agarwal

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N.K.Assumi (Advocate) 25 September 2010

In finance, this term refers to two or more loans, 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."

Murali (Advocate and Corporate Consultant) 26 September 2010

Pari Passu denotes the persons or bodies holding together equal rights according to their shares. Pari Passu gets importance normally in the case of insolvency. When a charge is created on the same asset in favor four banks and there is a pari passu agreement in force between them, the charge holding banks rank for distribution of the proceeds of the assets so charged in their favor equally without any one of them getting priority over others in which event, the participating banks will get their shares out of the proceeds in proportion to their debts. For instance, four banks viz., A, B, C and D lent Rs. 800/- 400/-, 200/- and 200/- respectively to X on the charge over property Y of X and assuming that X became insolvent and the Receiver sold the asset Y of X and realized Rs. 800/- , he will distribute the same among A, B, C and D at the rate of Rs.400/-, 200/-, 100/- and 100/- respectively in the ratio of 8/16, 4/16,2/16 and 2/16 as per the pari passu agreement.

Murali Krishna W

Advocate