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Division Of Investment Yield Not Commensurate With Capital Investment

Is it permitted for the investors to mutually agree upon a formula of division of investment yield that is not commensurate with the capital invested?

This returns to whether there is profit or loss on the investment. In case of profit, it is permissible to divide it according to any mutually agreed ratio. The investors are not bound to divide profits in proportion to their capital investment. This entails, for example, that two investors may have a 1:1 ratio of capital investment, and 2:3 ratio of division of profits.

However, loss on investment may only be divided in proportion to capital invested. Losses are charged directly to the capital itself, therefore their division must be according to the proportion of capital invested by each investor. Any stipulation that states to the contrary will be considered void.

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