A pari passu agreement is a legal document that outlines the equal treatment of creditors in the case of bankruptcy or default. The term “pari passu” is Latin for “on equal footing”, and thus the agreement ensures that all creditors are treated equally, regardless of when they made their claims on the debtor`s assets.

The agreement typically includes provisions that outline the order in which creditors will be repaid, as well as the terms and conditions of the repayment. For example, if a company goes bankrupt, the pari passu agreement will determine whether secured creditors (those who have collateral to protect their debt) will be repaid before unsecured creditors (those who do not have collateral).

Another important aspect of a pari passu agreement is the inclusion of anti-subordination clauses. These clauses ensure that no creditor can be subordinated to another without their consent. This means that if a creditor is asked to subordinate their claim to another creditor`s claim, they can refuse to do so and still be entitled to receive repayment of their debt.

Pari passu agreements are common in the world of finance, particularly in situations where multiple creditors are involved. They can be used in bond issuances, restructuring agreements, and loan agreements, among other things. The goal is to ensure that all parties are treated fairly and that there is a clear understanding of the order in which creditors will be repaid.

In conclusion, a pari passu agreement is a legal document that provides for the equal treatment of creditors in a bankruptcy or default scenario. It establishes the order in which creditors will be repaid and includes anti-subordination clauses to ensure fairness. As a professional, it is important to understand and articulate the meaning of a pari passu agreement for readers in the financial industry.

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Doutor em Filosofia e Mestre em Ciências Políticas pela Universidade Federal do Rio Grande do Sul (UFRGS), com Pós-Doutorado pela Columbia University, em NY. É Professor em tempo integral no INSPER, em São Paulo, e Curador do Projeto Fronteiras do Pensamento. fschuler@uol.com.br