Determining the percentage of profit distributed to shareholders
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The third question of Fatwa No. ( 6419 )
Q3: The companies currently established in Saudi Arabia, such as the Livestock Company and the Agricultural Banks, regarding how profits are distributed, it is as follows:
5% as a bonus for the company management, and 15% as a reserve, and no less than 5% is distributed to the shareholders as a first installment, and the reserve is set aside once the reserve reaches half of the company's capital. So the question here is: Does the 5% in the profit distribution fall under riba (usury or interest); because it was specified as no less than 5%? Since they may distribute more than that, what is the ruling on their statement: "provided that it does not fall below 5%"?
Vol. 3: It is permissible to specify a shared portion of the profit for distribution among the partners, such as one-tenth and half of one-tenth, which equals 5%, and this does not constitute specifying the amount of the profit. And success is from Allah, and may Allah send prayers and blessings upon our Prophet Muhammad, his family, and his Companions.
Q3: The companies currently established in Saudi Arabia, such as the Livestock Company and the Agricultural Banks, regarding how profits are distributed, it is as follows:
5% as a bonus for the company management, and 15% as a reserve, and no less than 5% is distributed to the shareholders as a first installment, and the reserve is set aside once the reserve reaches half of the company's capital. So the question here is: Does the 5% in the profit distribution fall under riba (usury or interest); because it was specified as no less than 5%? Since they may distribute more than that, what is the ruling on their statement: "provided that it does not fall below 5%"?
Vol. 3: It is permissible to specify a shared portion of the profit for distribution among the partners, such as one-tenth and half of one-tenth, which equals 5%, and this does not constitute specifying the amount of the profit. And success is from Allah, and may Allah send prayers and blessings upon our Prophet Muhammad, his family, and his Companions.
Source
www.alifta.gov.sa
The Arabic text is copied verbatim from the original source, without any edits.