Pari passu
The date from which new shares — from conversions, further issues or call payments — rank equally with a company's existing shares, reported to the depository the day it tells the stock exchanges.
In plain language
"Pari passu" simply means ranking equally. In this paper it has one very specific job: fixing the moment new shares stop being "new" and start being treated exactly the same as the shares already on the register — for dividends, voting, and every other entitlement.
This is a different use of the phrase from the one in an AIF's offer document, where "pari-passu rights" is about not letting one investor's special deal harm the others. Here, in the depository operations context, pari passu is about share ranking dates on corporate actions — conversions, further issues, final call payments — not about investor treatment inside a fund.
How it works
From Chapter 3, section 3.3.3 (the tripartite agreement's main terms): the Issuer must inform the depository, on the next day on which the same information is sent to the stock exchanges where its securities are listed, about "the dates from which new shares arising out of conversions, further issues, final call payments, etc. become pari passu with its existing shares."
This sits inside the Issuer's wider corporate-action reporting duty under the tripartite agreement — the same "next day" reporting standard applies to book closures, record dates, dividend and interest payment dates, AGM dates, redemption, conversion, amalgamation and similar events. The workbook gives no separate numeric formula for computing a pari passu date; it treats the date itself as a fact the Issuer determines and must report promptly.
A worked example
Konkan Textiles Ltd makes a rights issue, allotting new shares on 10 April. Under the terms of the offer, these new shares become pari passu with the company's existing shares — entitled to the same dividend — from 1 April, the start of the financial year, rather than only from the allotment date.
Under the tripartite agreement, Konkan Textiles must inform the depository of this 1 April pari passu date on the next day on which it sends that same information to the stock exchanges where it is listed — not weeks later, and not only when the dividend itself is actually declared.
If the company later declares a Rs 5 dividend for the year, every share — old and new alike — is paid on the same basis from 1 April, precisely because the new shares were made pari passu with the existing ones from that date.
Why NISM asks about it
Chapter 3, section 3.3.3, lists the pari passu reporting obligation as one of the tripartite agreement's specific terms, in the same "next day" reporting family as book closure and record-date information. Expect a question on who reports the pari passu date (the Issuer, to the depository) and when (the next day it goes to the stock exchanges).
Common exam traps
- This is a share-ranking date for corporate-action purposes, not the same concept as "pari-passu rights" in an AIF's offer document — the two share a Latin phrase, but this paper's use concerns dividend/entitlement ranking of new shares, not differential treatment of fund investors. Do not import figures or rules from one context into the other.
- The Issuer reports the pari passu date to the depository the next day it goes to the stock exchanges — the same "next day" standard that applies to book closure, record date and other corporate-action information under the tripartite agreement.
- The workbook gives no formula for computing the pari passu date itself — only the reporting obligation once the Issuer has fixed it.
Where this is taught
Free preparation for NISM Series VIRelated terms
- Tripartite agreementThe agreement signed by the depository, the issuer and the issuer's R&T Agent before that issuer's securities can be admitted for dematerialisation — it is the contract that makes a scrip demat-eligible.
- Cash corporate actionA corporate action that distributes money - such as dividend or interest - where the depository only tells the issuer who was entitled on the record date, and the issuer or its RTA pays them directly.
- IssuerThe company or body corporate that issued the securities — one of the institutions in the depository system, and the party that signs the tripartite agreement admitting its securities for dematerialisation.
- Accredited Investors only (AI-only) FundAn AIF or scheme in which every investor apart from the manager, sponsor and their employees or directors is an accredited investor — a class SEBI lets launch on intimation, with lighter investor-protection rules.
- Pari Passu ChargeOne common charge created over the same pool of security in favour of several lenders who all want the same level of charge, so none of them can be paid ahead of the others out of that security.