Sharikah (Musharakah) and Modern Corporations — practice questions

Correct answer: B. Clauses 3/1/2/1 to 3/1/2/5: Capital should in principle be monetary; tangible assets may be contributed with all partners’ agreement after their monetary value is determined and expressed in currency, and contributions in different currencies must be translated into the Sharikah’s currency at current exchange rates. Debts (receivables) alone may not be contributed, except where inseparable from other assets such as a firm’s net assets. Funds of current accounts, although juristically classified as loans to the Institution, may be contributed as capital, whether in a Sharikah with the Institution itself or with a third party.

Correct answer: C. Clauses 3/1/3/4 and 3/1/3/5: A fixed remuneration may not be specified in the Sharikah contract for a partner who manages the funds or provides other services such as accounting, since it would guarantee him a return irrespective of profit; he may, however, be given a greater share of profit than his capital ratio. A partner may also be appointed to provide such services under a contract independent of the Sharikah, so that he can be dismissed without amending the Sharikah, in which case he may earn a specific remuneration. Losses must always follow capital (Clause 3/1/5/4).

Correct answer: A. Clause 3/1/3/3: The partners may appoint a non-partner manager for a fixed remuneration charged as a Sharikah expense, and may add a portion of profit to the fixed remuneration as an incentive. However, if the management is carried out from the outset for a percentage share of the profit, the manager is classified as a Mudarib, entitled only to his share of profit, if any, and deserving no further remuneration for management services. As a Mudarib, he does not bear capital losses, which fall on the capital providers.