Dissolving a Company and the Refutation of Commercial Company of Joint Liability

প্রশ্ন · Question

Is there a difference or contradiction between the
following statements; or is there a deletion in the second statement
and consideration made based on the meaning given in the first
statement?
- First statement in The Economic System in Islam book in the chapter
of “Dissolving a Company”: (It becomes void by the death of any
partner or his becoming insane or if he was declared incompetent and
put under guardianship, if it is a company consisting of two persons.
Dissolution of the company by one of the two partners is valid because

it is a permissible contract, which is annulled in the same way as
deputation (Al -Wikala). If one of the partners dies leaving behind a
mature inheritor, he has the option to continue with the company and
his partner has to permit him to dispose (Tassarruf) in the company.
However, he also has the option to demand dissolution of the
company. If one of the partners demands dissolution of the company
then the other partner must accept his request. If they were more
than two partners, and one of them demanded the dissolution of the
company and the rest were happy to continue with the company, then
the existing company would be dissolved and renewed between the
remaining partners.)
- The second statement in The Economic System in Islam book in the
refutation of Commercial Company of Joint Liability and explaining its
contradiction to the conditions of companies in Islam:
(He has the right also to leave the company at any time he likes
without the need for the approval of the other partners. In addition,
the company is not dissolved by the death of any of the partners, or
due to his incompetence, rather his partnership alone is dissolved,
while the partnership of the other partners remains if the company is
formed of more than two persons)
The second question:
In the refutation of Commercial Company of Joint Liability the
following statement was made:
(If the partners agree to expand the company by either increasing their
capital or by adding other partners to them, then they are free to do
what they like)
Is the agreement to expand the company by increasing capital or
adding other partners necessitates the dissolution of the existing
company and the renewal of the partnership contract with a new
contract or not?

The third question: the above statement stated:
(If one of the partners dies leaving behind a mature inheritor, he has
the option to continue with the company and his partner has to permit
him to dispose (Tassarruf) in the company, However, he also has the
option to demand dissolution of the company)
What is the meaning of continuing with the company and what are his
powers, especially what does it mean there is an inheritor to the
speculator or there is an inheritor to the owner of the capital in the
speculative (Mudaraba) company, and is it permissible to continue the
company with the inheritor who is entrusted by the rest of the
inheritors, or does it have to be terminated and a new contract is
established, in case the partners wanted the continuity of the
company?
May Allah Bless you, and Jazak Allah Khair

উত্তর · Answer

Wa Alaikum Assalam Wa Rahamatullah Wa Barakatuh
All your three questions are regarding two subjects in the Economic
System in Islam book:
The first is regarding the Chapter of “Dissolving a Company”:
(The company contract is one of the contracts that are allowed by
Shari’. It becomes void by the death of any partner or his becoming
insane or if he was declared incompetent and put under guardianship,
if it is a company consisting of two persons. Dissolution of the
company by one of the two partners is valid because it is a permissible
contract, which is annulled in the same way as deputation (Al -Wikala).
If one of the partners dies leaving behind a mature inheritor, he has
the option to continue with the company and his partner has to permit
him to dispose (Tassarruf) in the company. However, he also has the
option to demand dissolution of the company. If one of the partners

demands dissolution of the company then the other partner must
accept his request. If they were more than two partners, and one of
them demanded the dissolution of the company and the rest were
happy to continue with the company, then the existing company
would be dissolved and renewed between the remaining partners.
However, there is a difference between the Mudharaba Company and
the other types of companies regarding the dissolution. In the
Mudharaba Company, if the worker demanded the sale of the
company and the Mudharib demanded division, then the demand of
the worker will be accepted because his right is in the profit that will
not be known except when selling. However, in the other types of
company, if one partner demanded division and the other demanded
sale of the company, the demand of division is accepted rather than
that of sale) End quote
The second subject is regarding the chapter “Commercial Company of
Joint Liability”:
(This is a contract between two persons or more, in which they agree
to trade together under a certain name. All its members bind
themselves towards the debts of the company with all their wealth,
with joint liability, and without any limit. Therefore, no partner of the
company can concede his rights in the company to another person
without the permission of the remaining partners. The company is
dissolved by the death of any of the partners or by his incompetence,
bankruptcy or insanity, unless there is an agreement that prevents
this. The members of this company are liable jointly towards its
commitments to others by fulfiling all the contractual commitments of
the company, and their responsibility in this matter is unlimited. Every
partner is held accountable to discharge all the debts of the company,
not only from the property of the company but if necessary from his
own property.

He has to pay from his property what is left unpaid of the debts of the
company after its property runs out. This company does not allow
extension of the project. The company is formed from a few people,
who trust each other and know each other well. The main element
considered in this company is the personality of the partners, not by
being people only but with regard to their standing and influence in
the society.
This company structure is invalid, because the stated conditions
disagree with the conditions of companies in Islam. For the divine rule
(Hukm Shar'i) places no condition upon the partner except that he is
allowed to dispose and the company should have the option of
expanding its activities. If the partners agree to expand the company
by either increasing their capital or by adding other partners to them,
then they are free to do what they like. The partner is also not
responsible, personally, in the compan y except in proportion to his
share in it. He has the right also to leave the company at any time he
likes without the need for the approval of the other partners. In
addition, the company is not dissolved by the death of any of the
partners, or due to his incompetence, rather his partnership alone is
dissolved, while the partnership of the other partners remains if the
company is formed of more than two persons. These are the Shari'ah
conditions. The conditions of the joint liability company as stated
earlier differ, and even contradict with these divine conditions, thus
making it an invalid company and it is not permitted by Shari’ to
associate with (or becoming a partner) in it.) End quote.
Here are the answers to your three questions:
Regarding your first question:
1- You did not specify where the contradiction lies in the two
statements you quoted from the Economic System book! But maybe
you mean that there is a contradiction between these statements; in
the chapter of Dissolving the company:

(The company contract is one of the contracts that are allowed by
Shari’. It becomes void by the death of any partner or his becoming
insane or if he was declared incompetent and put under guardianship,
if it is a company consisting of two persons. Dissolution of the
company by one of the two partners is valid because it is a permissible
contract, which is annulled in the same way as deputation (Al-Wikala).
And in the chapter of “Commercial Company of Joint Liability”:
(the company is not dissolved by the death of any of the partners, or
due to his incompetence, rather his partnership alone is dissolved,
while the partnership of the other partners remains if the company is
formed of more than two persons)
In the first statement, he mentioned that the company is void due to
the death of one of the partners, and in the second statement he
mentions that the company is not dissolved by the death of one of the
partners, so how is that?
Taking a deeper look at both statements above, it becomes clear that
there is no contradiction or difference between them, rather they are
in agreement and harmony. This is because the first statement:
(The company contract is one of the contracts that are allowed by
Shari’. It becomes void by the death of any partner or his becoming
insane or if he was declared incompetent and put under guardianship,
if it is a company consisting of two persons. Dissolution of the
company by one of the two partners is valid because it is a permissible
contract, which is annulled in the same way as deputation (Al-Wikala).
is talking about the company that is between two people; if one of
them dies, then the company ends by his death, because the contract
of the company is not perceived to be between less than two partners.
If the contract was between two partners, and one of them dies then
the company will no longer exists in the event of the death of one of
the partners. This is clear.

As for the second statement:
(the company is not dissolved by the death of any of the partners, or
due to his incompetence, rather his partnership alone is dissolved,
while the partnership of the other partners remains if the company is
formed of more than two persons)
It speaks of a company consisting of more than two partners, such as
five or six partners. In this case, the death of one of the partners does
not affect the existence of the company, so it remains because there
are still four or five partners left. That is the reality of a company
remains according to Shariah. And only the deceased’s partnership
with the company is dissolved, because of his death, because the
contract of partnership does not remain with his death. Therefore, the
second term means that the partner’s partnership invalidates alone,
not the whole company because of the multiple partners. The first
statement means the whole company is dissolved because it exists
between the two partners only; therefore, there is no contradiction
between the two statements.
That is if you see that the contradiction is in what we mentioned
above, but if you see that the contraction lies in these two
statements:
(If they were more than two partners, and one of them demanded the
dissolution of the company and the rest were happy to continue with
the company, then the existing company would be dissolved and
renewed between the remaining partners).
And (the company is not dissolved by the death of any of the partners,
or due to his incompetence, rather his partnership alone is dissolved,
while the partnership of the other partners remains if the company is
formed of more than two persons)
Here too, there is no contradiction between the two above underlined
statements:

The first statement speaks about the company's dissolution of one of
the partners. This affects the whole contract because the partners
assign each other in the partnership contract. If one of them breaks
the partnership contract, the whole contract has been affected
because of the deputation (Wikala), because the one who asked the
dissolution of the company has withdrawn his wikala from the other
partners, and asked them to withdraw the power to assign that they
gave him; that is, the existing wikala in th e company has been
disrupted, so the partners who intend to stay in the company need to
renew the partnership contract.
The second statement refers to the death of one of the partners or to
disable him (from financial activity). This is different from the
dissolution because there is no dissolution by the deceased or of the
person who is disabled. Rather, it is the end of their deputation due to
death for the deceased, and prohibition of the one disabled (from
financial activity), This has no effect on the deputation between the
rest of the partners because it has not been disturbed by anything that
affects it. Therefore, th e rest of the partners remain and the company
remains between them and does not need a renewal of the contract if
the reason for the exit of one of the partners is death or disability of
financial activity.
2- As for the second question, the expansion of the company is by one
of two things:
A- By the increase of the capital of the partners or the capital of some
partners in the company, and this does not require the dissolution of
the existing partnership contract, because there is nothing that
disrupts the existing partnership contract, so the contract remains
between the members of the company. If they agree to increase the
share of partners in the capital then their rates of profits is adjusted
according to emergency changes in capital. This item shall be attached
to the company's rules pri or to the amendment of the partners'

shares; that is, the approval of the existing company is necessary to
increase the capital and the consequent redistribution of profits.
B- By the addition of new partners and this also does not require the
dissolution of the existing partnership contract, because there is
nothing that disrupts the existing partnership contract. So the contract
remains between the members of the company. if they agree to the
new partners, a contract between the existing company and the new
partners is done according to the conditions and shares of profits. The
shares of the old partners in capital are adjusted as well the
adjustment of their profits in accor dance with the emergency changes
in the capital. The item shall be attached to the company's rules held
prior to the incorporation of the new partners. That is, the approval of
the existing company is necessary for the incorporation of new
partners and the consequent amendment in profits, etc.
In conclusion, the existing company is not disrupted due to the
increase of the company's capital or the inclusion of new partners as
long as this is done with the approval of the existing partnership.

3- As for the third question, the answer is as follows:
The deceased partnership contract ends with his death because the
partnership contract is a matter of power of deputation, and the
deceased deputation (to give or take it) ends with his death. That is, if
the deceased is the capital owner, then giving his deputation to the
partner ends with his death and if the dead is an employee, for him to
take deputation from the partner ends with his death. Thus the
deceased partnership is dissolved and is invalid by his death whether
he is the owner of the money or the employee in the company. It is not
necessary after death to break the partnership of the deceased
because it is dissolved naturally.

And by the death of the partner, the right in the company belongs to
his inheritors, and they have the choice between two things:
A- Demand the division (of capital); that is, to return any of the capital
to the owner of the capital as well as the profit he earned, and give the
worker that profit that he earned according to the details shown in the
books of jurisprudence.
B- To continue as partner in the company with the consent of the
other partner, and the meaning of continuation in the company is that
the partners agree, the partner not deceased with the inheritor of the
deceased partner, to hold a partnership contract under the previous
conditions in the company with the deceased, and that the inheritor
takes the place of the deceased partner in the company: If the
deceased is the owner of the capital, then the inheritor becomes the
owner of the capital. If he is the onl y inheritor or he is nominated by
the rest of the inheritors to represent them if they are many. If the
deceased was an employee, the inheritor becomes an employee.
The living partner continues with his previous title before the death of
the partner; that is, if he is the owner of capital, he remains the owner
of capital. If he was an employee, he remains so. Note that the profit
of the employee if the profits are calculated after the death of the
deceased partner and then was added to the capital of the company,
the employee will have a share in the capital; that is, he becomes the
owner of capital and effort.
Of course, remaining in the company takes into account:
- The fact that the money of the company at the death of the partner is
"nadan" as in the terminology of jurists i.e. be in dinars or dirham or
money, then the new contract with the inheritor will be easy to write.
- If the money of the company or some of the offers of any goods, not
money, then there are many fiqhi details on how to make the goods as
“nadan”, i.e. currency money, and about the dates of the goods, and

regarding the continuation of the company in this case. These details
are found in the books of jurisprudence for those who wanted to refer
to them.
- Also to take into consideration the change that may occur in the
shares of the partners in the capital if the profit of the owner of the
capital was added from the previous company to the capital of the
new company, or if the profit of the employee was added from the
previous company to the capital of the new company.
I hope this answer is sufficient.
Your brother,
Abu Yasin
28 Ramadan 1440 AH
2/6/2019 CE