Definition
Par value is the nominal or face value assigned to a share of stock or a bond as stated on the instrument itself. It represents a fixed dollar amount set at issuance, independent of any market price the security may later command.
In corporate law, par value serves two principal functions:
1. Stock: The minimum price below which shares may not be issued. A corporation's charter specifies par value per share, and that figure anchors the calculation of stated capital — the portion of paid-in capital that must remain in the corporate treasury and cannot be distributed to shareholders as dividends.
2. Bonds and debt instruments: The face amount that the issuer promises to repay at maturity, also called the principal. A bond trading "at par" sells for exactly its face amount; one trading at a premium or discount sells above or below it.
Modern corporate practice has largely abandoned meaningful par values for stock. Most shares are now issued with a nominal par value — often $0.001 or $0.01 per share — or as no-par stock, precisely to avoid the legal complications that historically arose when shares were sold below par.
Common Language
Modern common usage (Wiktionary): The amount or value listed on a bill, note, stamp, etc.; the stated value or amount.
Historical common usage (Webster's 1913): Webster's 1913 treats "par" as meaning equality or equal footing — the standard from which deviation is measured — carrying a sense of equilibrium rather than a fixed printed figure.
The common usage captures the face-amount meaning accurately for bonds and currency instruments, where par value and market value often diverge in a straightforward way. The gap appears in corporate stock: a share's par value today is almost never its market value, rarely its book value, and in modern practice is set at a trivially low figure for purely mechanical legal reasons. A researcher or investor who reads "par value" in stock documents and assumes it signals something about economic worth will be misled.
Common Confusion
Par value is frequently conflated with book value and market value. They are distinct:
- Par value: a fixed, charter-specified nominal figure, set once at incorporation.
- Book value: the net asset value of the company divided by shares outstanding, which fluctuates with the company's balance sheet.
- Market value: the price at which shares actually trade, which fluctuates with market conditions.
A bond trading "at par" means its market price equals its face value — a coincidence of two figures that ordinarily diverge. In stock, par value and market value almost never align after the earliest stage of a company's existence.
Why It Matters in Research
The legal significance of par value for stock has followed a clear historical arc, and that arc matters for how you read sources across different eras.
In the nineteenth and early twentieth centuries, par value was substantively important. State corporate law used it to police undercapitalization: issuing shares below par was either prohibited or created liability for directors and purchasing shareholders. Creditors could rely, in theory, on stated capital as a cushion. Legal disputes over "watered stock" — shares issued at inflated consideration — turned on par value calculations. Bouvier's note that par value implies "a dollar in money for every dollar in security" reflects this era's expectation that par value carried real protective weight.
By the mid-twentieth century, the Model Business Corporation Act and most state statutes eliminated or marginalized par value requirements. Delaware retains par value in its statutory framework but permits trivially low par, making stated capital calculations largely a formality. A researcher reading pre-1950 corporate law sources must understand par value as a genuinely operative legal constraint; post-1970 sources treat it as a vestigial formalism.
For bonds and debt instruments, par value retains active significance. Bond indentures, municipal securities regulations, and federal securities disclosure requirements continue to use par value as the baseline for interest calculations, redemption prices, and yield computations.
Trap for researchers: when historical sources discuss corporate "capital" requirements, they often mean stated capital calculated from par value. Do not assume those sources are referring to paid-in capital or total equity in the modern accounting sense.
Corpus connection: par value intersects with capitalization structure, dividend restrictions, and stock issuance authority — all of which appear in the Business Organizations encyclopedia. In secured transactions contexts, par value of pledged securities can affect collateral valuation questions.
Historical Dictionary Support
Bouvier's entry is brief but precise for its era. The definition pivots on two uses: the revenue law meaning (the fixed sterling value for customs and revenue purposes) and the more general commercial meaning (face value of bonds or stock). The phrase "a dollar in money for every dollar in security" is the telling formulation — it encodes the protective assumption that par value should track real consideration, which was the premise of the entire anti-watered-stock doctrine.
What Bouvier's misses, predictably, is the modern inversion: the widespread adoption of nominal par values that make that protective premise meaningless. No historical dictionary in this corpus captures the Model Act reforms or the Delaware practice of $0.001 par shares. Researchers should treat the Bouvier's entry as a reliable window into the classical doctrine and an unreliable guide to modern corporate practice.
Jurisdictional Note
Delaware retains par value as a statutory concept but effectively neutralizes it by permitting any par value the charter specifies, no matter how low. Many states following the Model Business Corporation Act have eliminated mandatory par value entirely, allowing no-par stock as the default. The practical effect has converged, but the statutory vocabulary differs, which matters when comparing charter documents or statutes across jurisdictions.
Encyclopedia Cross-Reference
Corporate Finance — Capitalization, Par Value, and Stated Capital (The Law Mind Business Organizations & Corporate Law Encyclopedia)