We use cookies to improve security, personalize the user experience,
enhance our marketing activities (including cooperating with our marketing partners) and for other
business use.
Click "here" to read our Cookie Policy.
By clicking "Accept" you agree to the use of cookies. Read less
What is Par Value? A Comprehensive Guide to Its Legal Definition
Definition & Meaning
Par value, also known as face value, refers to the nominal or assigned value of a financial asset or legal claim. For debt securities, such as corporate bonds or U.S. Treasury securities, par value is the amount that will be repaid to the bondholder at maturity. In the case of equity securities, like corporate stocks, par value represents the initial value set when the stock is issued.
It is important to note that par value does not always reflect the current market price of the asset. In some cases, par value is simply a legal requirement for issuing stocks in certain states, and not all states mandate that shares have a par value.
Table of content
Legal Use & context
Par value is primarily used in the context of securities law and corporate finance. It plays a crucial role in determining the legal capital of a corporation and can affect the rights of shareholders and creditors. Understanding par value is essential for those involved in:
Corporate governance
Securities regulation
Investment analysis
Users can manage related legal documents using templates available through US Legal Forms, which are drafted by qualified attorneys.
Key legal elements
Real-world examples
Here are a couple of examples of abatement:
1. A corporation issues bonds with a par value of $1,000. At maturity, the bondholder will receive $1,000, regardless of the bond's market price at that time.
2. A company issues shares with a par value of $0.01. This amount is primarily for legal purposes and does not reflect the actual trading price of the shares on the stock market.
State-by-state differences
Examples of state differences (not exhaustive):
State
Par Value Requirement
California
Requires par value for all shares
Delaware
Allows shares to be issued with or without par value
Texas
Par value is optional for corporations
This is not a complete list. State laws vary and users should consult local rules for specific guidance.
Comparison with related terms
Term
Definition
Key Difference
Market Value
The current price at which an asset can be bought or sold.
Market value fluctuates based on supply and demand, while par value is fixed at issuance.
Book Value
The value of an asset according to its balance sheet account.
Book value may include depreciation, whereas par value does not.
Common misunderstandings
What to do if this term applies to you
If you are dealing with par value in your financial or legal matters, consider the following steps:
Review the par value of any securities you own or are considering purchasing.
Consult with a financial advisor or legal professional to understand the implications of par value on your investments.
Explore US Legal Forms for templates that can help you manage related legal documents.
For complex issues, seeking professional legal advice is recommended.
Find the legal form that fits your case
Browse our library of 85,000+ state-specific legal templates.