Q: Mr Company intends buying a property for R10 million. They have R4 million available and want others to invest the remainder of the money with them. Ishaaq, Saleem and Faheem are willing to invest. Ishaaq will invest R3 million, Saleem R2 million and Faheem R1 million. They want to invest in it on a diminishing mushaarakah basis. The profits and losses will be shared according to the capital contribution, and the company is willing to pay all 3 of them off in approximately 5 years.
Assuming that the property yields a rental income of R100 000 a month (R1.2 million a year)
Income distribution
| Mr C | Mr C | Ish | Ish | Sal | Sal | Fah | Fah |
Year 1 | 40% | R480000 | 30% | R360000 | 20% | R240000 | 10% | R120000 |
Year 2 | 55% | R660000 | 25% | R300000 | 15% | R180000 | 5% | R60000 |
Year 3 | 70% | R840000 | 20% | R240000 | 10% | R120000 |
Year 4 | 80% | R960000 | 15% | R180000 | 5% | R60000 |
Year 5 | 100% | R1200000 |
Purchase of Shares by Mr Company
| Mr C | Mr C | Ish | Ish | Sal | Sal | Fah | Fah |
Year 1 | 40% | R4 mil | 30% | R3 mil | 20% | R2 mil | 10% | R1 mil |
Year 2 | 55% | R5.5 mil | 25% | R2.5 mil | 15% | R1.5 mil | 5% | R500 000 |
Year 3 | 70% | R7 mil | 20% | R2 mil | 10% | R1 mil |
Year 4 | 80% | R8 mil | 15% | R1.5 mil | 5% | R500 000 |
Year 5 | 100% | R10 mil |
1) Is the above form of investment permissible?
2) Is it permissible to change the profit sharing ratio to suit the needs of the investors, different from the capital contribution ratio? For example, in the
above scenario, Mr Company contributed 40% and Faheem 10%, but in order to please Faheem, they agree to let him take 15% profit while Mr Company takes 35%?
3) Is it permissible to fix an amount to be paid to a certain investor? For example, every month as a return on his investment, he will receive R20 000?
4) Is it permissible to set a fixed percentage of the investment as a return? For example, he will receive a 10% return on his investment monthly?
5) For the sake of ease in distributing the profits, is it permissible to distribute the profits during the year based on estimated profits that will
be received, and at the end of the year, make the necessary adjustments based on the actual profits that were received? Thus, at the end of the year, the profits will be adjusted for each shareholder in accordance to the actual profits received.