What is it?
This term functions as a specific clause type within corporate documents that governs the initial accounting and rights attached to securities issued by a corporation.
par value
Corporate LawLegal glossary term
Quick answer
Par value usually means the fixed, stated face amount of a stock or bond, separate from its current market price. In contracts, it matters because it sets baseline rights like dividend payout priority. Before signing, check that the par value is explicitly listed on the security instrument.
Definitions
What is par value?
Legal Definition
Par value dictates a nominal, fixed monetary worth assigned to a share of stock or bond, regardless of its fluctuating market price. This assigned face amount establishes baseline legal rights, such as dividend entitlement or redemption priority for investors. Practitioners often focus on whether the par value is stated explicitly in the certificate or implied by state statute.
Plain-English Translation
Par value is like the sticker price written on a permission slip; even if you trade it for more later, the original value stays fixed at $1.
Contract relevance
Why par value matters in contracts
Misstating par value can lead to shareholder disputes or invalidate certain stock transfer agreements under state law. The issuing corporation bears the primary risk if the stated amount is contested.
Document context
Where par value appears in documents
| Document type | Section | Why it matters |
|---|---|---|
| Stock Purchase Agreement | Article II (Securities) | Establishes the nominal worth of shares being exchanged. |
| Bond Indenture | Section 3.1 (Face Value) | Determines the principal amount repayable at maturity. |
| Investment Trust Prospectus | Summary Data Sheet | Provides immediate clarity on the underlying asset's official value. |
| Corporate Bylaws | Article I, Section 4 | Governs how dividends are calculated based on the stated par value. |
| Securities Purchase Contract | Schedule A (Security Details) | Confirms the agreed-upon nominal unit price for traded securities. |
Contract language
Common contract wording
| Contract wording | Plain-English meaning | What to check |
|---|---|---|
| Stock issued at a par value of $1.00 per share | The official, stamped worth of one piece of stock is only one dollar. | Ensure this matches the market rate expectations. |
| Bond carrying a face value (par) of $1,000 | The principal amount the issuer promises to pay back upon maturity is $1,000. | Verify if payments are calculated on this base amount. |
| Certificates shall bear par value as defined in Exhibit A | Look at Exhibit A to see exactly what dollar amount they used for the official valuation. | Do not rely only on oral agreement. |
Red flags
Red flags to watch for
Wording examples
Clearer wording examples
Vague wording
'Par value'
Clearer wording
'Nominal face value'
Vague wording
'Stated value'
Clearer wording
'Assigned minimum value'
Note: “clearer” means easier to read — not legally reviewed or guaranteed safe.
Pre-signature checklist
What to check before signing
1
Is the exact dollar amount clearly stated?
2
Does the contract specify which state governs the definition?
3
Is the par value consistent across all attached exhibits?
4
If a bond, is this the principal repayment amount?
5
If stock, does this align with expected dividend calculations?
6
Have you verified the company's charter declaration of par value?
Party impact
How par value affects each party
| Party | What this party should check |
|---|---|
| Investor/Shareholder | Check that the contract uses the stated par value to calculate your rights (dividends, voting power). |
| Lender/Bond Holder | Verify this amount is used for coupon payments and final principal redemption. |
| Seller/Issuer | Ensure you are selling or issuing securities at a price relative to the established par value. |
| Buyer of Securities | Confirm that if market fluctuations occur, the contract defaults back to the stated par value terms. |
Comparison
par value vs similar terms
| Related term | Plain meaning | Main difference from par value |
|---|---|---|
| Face Value (Par Value) | This is the fixed, legal-assigned worth stamped onto the certificate. | Market price moves; par value stays put. |
| Liquidation Value | This is the estimated net worth of the company per share upon winding up. | Par value is a *starting point*; liquidation value reflects final asset reality. |
Missing or vague
If par value is missing or vague
If par value lacks a specific dollar amount, you face ambiguity regarding baseline rights. A vague definition might lead to disputes over how dividends are calculated—is it 1 share = $0.01 or is it based on an unstated standard? Furthermore, if the contract simply says 'par value,' and state law allows for multiple interpretations, litigation will ensue attempting to prove intent. Always demand a concrete number.
Document map
Document section map
| Contract section | What to inspect |
|---|---|
| Definitions Section | Look here first; this is where the term should be formally defined within your agreement. |
| Security Description Clause | This section details the specific stock or bond being traded and must list the par value there. |
| Dividend Calculation Formula | Check how payouts are calculated—it should reference the par value as the base unit. |
| Redemption Terms | For bonds, this clause dictates repayment based on the stated face/par amount. |
Visual model
Understand par value fast
An explainer image has not been generated for this term yet.
01
The Landlord sets the rent at $150 (par value) per month; if the market rises to $200, the base obligation remains $150.
02
A Borrower issues 10,000 shares with a par value of $0.01 each; this establishes the minimum capital contribution required for loan covenants.
03
The Franchisor sells stock at $75 per share, but the legal documentation lists its par value as $10.00, defining the underlying asset worth.
Document context
How par value shows up in legal documents
Why does it matter?
Misstating par value can lead to shareholder disputes or invalidate certain stock transfer agreements under state law. The issuing corporation bears the primary risk if the stated amount is contested.
When does it matter?
The par value becomes legally operative when the security is officially issued and recorded with the state's Secretary of State within a specified period following its creation.
Where is it usually seen?
It appears consistently in Articles of Incorporation, stock certificates, bond indentures, and purchase agreements governed by UCC Article 8 (Securities).
Who is affected?
The shareholder holds the right to dividends based on par value. The issuing corporation must adhere to this value when reporting capital structure to regulators.
How does it work?
First, a company sets an official face amount—the par value—upon incorporation. Then, each share is legally documented with that specific figure. Within any subsequent sale or merger, the par value anchors the original claim on the asset.
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Wikipedia
Par value
In finance and accounting, par value means stated value or face value of a financial instrument. Expressions derived from this term include at par (equal to par value), above par (greater than par value), below par (smaller than par value) and no-par (has no...
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BGRisk context hubGlossary meaning, document paths, and adjacent risk pages connected around this clause.
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Source & disclosure
This page is an AI-assisted plain-English explanation based on LexPredict Legal Dictionary context and contract-review patterns. It is not legal advice. Meaning may vary by jurisdiction, industry, and exact clause wording.
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