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Definition of Pari Passu

In a venture capital context, pari passu is often used to mean that preferred stockholders across all stages of financing have the same seniority status for their liquidation preference (this is also referred to as blended preferences), though pari passu can be used in a more general sense to mean equal treatment among parties.

Consider an example of how pari passu would work with liquidation preferences. Assume a startup has raised Series A and Series B rounds of financing, and assume that both Series A and Series B investors have a 1x liquidation preference and they're described as ranking "pari passu" in the investment agreements.

In that case, if the startup were to sell, the Series A and Series B investors would share the sale proceeds pro rata and on equal footing between the classes of shares. In other words, Series B investors wouldn't get paid before Series A investors and vice versa because they're treated as pari passu.