Shariah’s Black Box

[101] This might not be the case if the company is a publicly-owned company or even a company with other shareholders where the law articulates a duty to minority shareholders. See Mary Siegel, Fiduciary Duty Myths In Close Corporate Law, 29 Del. J. Corp. L. 377 (2004) (discussing fiduciary duties in context of close corporation).

[102] Such nominate contracts include cost-plus agreements where a purchase money lender purchases and immediately resells the collateral to the borrower at an agreed upon stepped-up price with a deferred payment schedule, or sale-lease back agreements where the lease payments cover the interest for the loan. Vogel & Hayes, supra note 18, at 181-200. Recently, certain Shariah authorities have even developed what are represented as Shariah compliant structures to allow investment in highly speculative derivates, something most Shariah authorities have forbidden altogether. For a theoretical discussion of “legal” derivatives, see id. at 219-232. For an example in practice, see Slater, supra note 56.

[103] See supra note 93.

[104] See McMillen, supra note 88, at 1259-1260.

[105] Tax matter agreements are most properly and conservatively used in inter-company tax allocations for related entities. See, e.g., Interagency Policy Statement on Income Tax Allocation in a Holding Company Structure, 63 Fed. Reg. 64,757 (Nov. 23, 1998).

[106] Id.

[107] For a discussion of defining and classifying “financial intangibles” and the complexities in the post-Enron world, see Olufunmilayo B. Arewa, Measuring and Representing the Knowledge Economy: Accounting for Economic Reality under the Intangibles Paradigm, 54 Buffalo L. Rev. 1 (2006); Anthony J. Luppino, Stopping The Enron End-Runs And Other Trick Plays: The Book-Tax Accounting Conformity Defense, 2003 Colum. Bus. L. Rev. 35.

[108] See, e.g., Interagency Policy Statement on Income Tax Allocation in a Holding Company Structure, 63 Fed. Reg. 225 (Nov. 23, 1998) available at https://www.fdic.gov/regulations/laws/federal/98soptx.pdf (last visited Feb. 14, 2008). See also Arewa, supra note 107, and Luppina, supra note 107 (discussing the complexities of structuring transactions with conflicting purposes).

[109] See, e.g., Pahl v. Commissioner, 150 F.3d 1124, 1128 (9th Cir. 1998).

[110] Throughout the legal literature on SCF, there is a recognition that defaults and bankruptcies will pose real challenges because it is not clear how the transactions will be characterized. See, e.g., McMillen, supra note 90 (much of the deal structures were addressing the uncertainty of default under Shari’a legal systems) and McMillen, supra note 88 (enforceability and rating issues for securitization of bond issuances).