Establishment of the Bank
The bank would be established on the principles "Shirkat-al-Enan"( is that two or more persons participate in an enterprise with fixed amounts of capital agreeing that they will work jointly and share in profit or loss in specified proportions), that is, a number of persons providing share capital to be jointly invested, hereafter called 'shareholders'. the shareholders would finance enterprise on the basis of partnership or mudaraba and render other services against fees or commission.
The minimum number of shareholders must be two. No maximum number can be fixed, theoretically, but for operational convenience as well as other reasons some upper limit, varying with local conditions is appropriate. the number of shareholders should not be too great, and in their best interest, should be kept to the minimum, though always more than two.
The amount of capital provided by each shareholder may be equal or may vary. ideally, share value might be fixed at Rs.100,000 or 1000$ share with each shareholder being allowed to secure as many shares as he wishes. the minimum and maximum limits of the subscribed capital may also be specified. ultimately, each shareholder would become the owner of the bank, proportionately with the level of his assets in the total investment.
The distribution of the bank's profits should be proportionate to the size of capital investment (number of shares) and, for this purpose, the total profit may be divided by the total investment in the bank to determine the percentage payable to each individual shareholder. there is, however, every justification for some formula of disproportionate distribution of profit, given that some shareholders would be more competent and willing than others to effectively promote the business and take on managerial responsibilities. But for the sake of smooth running of the bank's business and for the establishment of a meaningful accounting system, profit-distribution should, in our view, be based upon the number of paid-up shares, bearing in mind (in the light of the principles of the Shari'a for partnership) that if the bank goes into loss in any year, no shareholder can escape his liability, and must share the loss in proportion to the size of his shares.
The minimum number of shareholders must be two. No maximum number can be fixed, theoretically, but for operational convenience as well as other reasons some upper limit, varying with local conditions is appropriate. the number of shareholders should not be too great, and in their best interest, should be kept to the minimum, though always more than two.
The amount of capital provided by each shareholder may be equal or may vary. ideally, share value might be fixed at Rs.100,000 or 1000$ share with each shareholder being allowed to secure as many shares as he wishes. the minimum and maximum limits of the subscribed capital may also be specified. ultimately, each shareholder would become the owner of the bank, proportionately with the level of his assets in the total investment.
The distribution of the bank's profits should be proportionate to the size of capital investment (number of shares) and, for this purpose, the total profit may be divided by the total investment in the bank to determine the percentage payable to each individual shareholder. there is, however, every justification for some formula of disproportionate distribution of profit, given that some shareholders would be more competent and willing than others to effectively promote the business and take on managerial responsibilities. But for the sake of smooth running of the bank's business and for the establishment of a meaningful accounting system, profit-distribution should, in our view, be based upon the number of paid-up shares, bearing in mind (in the light of the principles of the Shari'a for partnership) that if the bank goes into loss in any year, no shareholder can escape his liability, and must share the loss in proportion to the size of his shares.
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