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ARTICLE · 28 MARCH 2023

Pari Passu: Liquidation Australia

JB Solicitors
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What is Insolvency? What Pari Passu Means For Individuals and Businesses? Circumstances with Pari Passu can occur.

AustraliaInsolvency/Bankruptcy/Re-Structuring
John Bui
John Bui
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The term 'Pari passu' principle means 'on equal footing (with equal step), proportionately'. The principle of pari passu is frequently used in bankruptcy and insolvency law proceedings to ensure that all creditors (people or companies to whom money is owed) are treated fairly and equally. It aids in preventing certain creditors from receiving preferential treatment over others. These certain creditors are:

  1. Secured creditors: Has acquired a security interest in the business' assets (banks or lenders)
  2. Unsecured creditors: Has not acquired security interest in the business's assets (trade creditors and suppliers). The pari passu principle only applies to an unsecured creditor.

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