Preference Shares which gives additional right at liquidation are widely used at conventional VC investment agreements. At technology startups there are usually different level and number of investors including VC funds. And it doesn’t seem right to sign same documentation even you don’t want to take mentioned rights. What would be the way to be a part of investment agreement at co-investing with VC funds?
A generalised fatwa cannot be given on this. It really depends on the investment and what can be done to make the investment Shariah compliant. Broadly,
- You would need to remove this from the contract and structure.
- Restructure to eliminate the preferred implications - this needs a Shariah advisor.
Allah knows best