Are capped social investments halal?

Investment Questions and Chats General Investment
#1

Assalamu alaykum,

Some social enterprises (generally community benefit societies and co-ops) issue shares on which ‘dividends’ are capped annually at a percentage of capital invested. Dividends are only payable at the discretion of the directors, are not necessarily paid in full, and do not carry forward if unpaid in any given year. Capital is fully at risk.

Any surplus over and above the capped distribution belongs to the members collectively. Sometimes the members can decide together to sever their interests in the surplus by dissolving the entity; sometimes the surplus is effectively an indivisible reserve for the objects of the society (ie, for the social cause).

There are some examples in this Guardian article.

I think a dividend expressed as a proportion of invested capital is normally not permissible? Ditto an indivisible reserve/unseverable interest? If I’m right, could there be an exception in these cases for social benefit?

Jazakum Allah khayra and tawfiq for this effort.

[EDIT for clarity 2020-06-06 21:19]

#2

Assalaamu alaykum,

In principle, dividends can be capped and the excess can be put into reserves or treated differently as per the agreement between the shareholders.

In terms of allocating profit, the reason why it cannot be a percentage of capital is that it then becomes a certain amount as opposed to a percentage of profit. It no longer reflects the profit making element in a company and is therefore unjust to the shareholders.

Allah knows best