Friday, 17 June 2011

What is Modarba and discuss its main features

Modarba :-
Modarba means the business in which some persons participate with their capital and the mangers or modarab with their managerial skill. The profit are distributed among both parties according to the agreed ratio. In case of loss it is distributed among the financiers according to their invested capital.

Features of Modarba :-
1. It is an agreement, in which one party provides managerial skill and other party provides capital funds to carry on the business.
2. Profit is shared according the agreed ratio.
3. It may be for "Multiple Purpose " or for special purpose.
4. This business must be governed by the "Modarba Companies Modarba Rules, 1981.
5. According to the modarba rules at least 10% shares are compulsory for the party who provides managerial skill.
6. A company which is registered as a modaraba. Company can float a modarba.
7. For the floating of modarba. Company must obtain the permission from the registrar and controller.
8. A clearance certificate is also obtained from the Religious Board that business is not against the Islamic Laws.
9. Each modarba company has to appoint the charted accountant, as auditor who will certify the accounts and objectives of Musharika.

Note :- If the loss occurs due to modarab or manager negligence then he will also share the loss. A modarba is legal person. A modaraba company can sue and be sued. Govt. of Pakistan issued the Modarba companies ordinance in 1980 to encourage the business on the basis of profit sharing.

Registrar :- The Govt. has also appointed a registrar for the registration of Modarba companies.

Kinds of Modarba :-
It has two kinds :
1. Multipurpose modarba :- A business which has more than one objective is called multipurpose modarba.
2. Specific modarba :- It is established for the specific purpose.


1. Halal Business :-
A modaraba company can not do any business which is against the principles of Islam. The Govt. of Pakistan has set up a religious board which will give clearance to each Modarba company about its business activity.

2. Appointment of Auditors :-
Each modaraba company will appoint the auditor approved by the registrar. He will certify his objectives and accounts of the company.

3. No loan to the Directors and Officers :-
The officers, directors or their relatives can not take the loan from the funds of the Modarba company in any shape.

4. Same Nature Business :-
The modarba company can not engage itself any business in competition which has the same nature with the modarba floated by it.

5. Cancellation of Registration :-
The registrar can cancel the registration if Modarba company fails to comply the rules of the modarba ordinance.


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