What is the detailed explanation regarding what is called joint-stock companies in terms of their reality and ruling?
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The questioner : Shaykh, regarding the question about joint-stock companies, I asked you about them before, and the answer was brief, so we want the details: the joint-stock company in the concept of current capital, which is not under the control of specific known individuals, I would like you to elaborate on this issue so that a person comes out of it with correct knowledge?
The Shaykh : This question is only properly investigated when the company is established on legal principles that do not contradict the Shari'ah; only then is it examined in detail. So, first of all: the question as it is asked today contradicts itself; do joint-stock companies not deal with riba (usury or interest)? You would be the first to say: they deal with riba; so what is the motivation for the question?
The questioner : It is defective.
The Shaykh : Yes?
The questioner : It is defective.
The Shaykh : I did not understand.
The questioner : The company is defective.
The Shaykh : The company is defective, that is one thing.
The Shaykh: The second thing: suppose that a company—perhaps we will find one existing one day—does not deal with riba; we would say: the shares that are offered are a company of the type of mudarabah (profit-sharing partnership) with money; because Zayd participates with ten shares and another with a thousand, and so on. But—also—the issue goes beyond the legal rulings when these shares remain shares that have not yet been converted into any work. We know from reality that any institution or company intended to be established offers its shares in the market; that we have, for example, a thousand shares, the share at ten and the share at a hundred, and so on, and these shares end and the company fills up the value of all the shares it offered, before these funds are converted into, for example, trade, a factory, or anything else, they are offered in the market for sale, and the share that was, for example, priced at ten is either sold for eleven or sold for nine; this is another legal violation; because it is the very riba, an increase or a decrease. And I also believe that there is no company that observes this issue before the shares are converted into a commodity, trade, factory, or anything else.
The Shaykh: Likewise, we keep walking in imagination far away, and we say if we suppose that a company offered the shares and kept the money with it and not in the bank, and started buying the necessities for establishing the factory or for establishing the company, or so on, in this form there is absolutely no obstacle to it; contrary to what the Tahrir Party says; because there is a very important rule, which is: "The default in acts of worship is prohibition except with evidence, and the default in customary matters is permissibility except with evidence"; so these transactions are not acts of worship. The one who wants to prohibit them on the pretext that this was not the type of dealing in the past is, at the very least, narrow-minded, narrow in thinking, has not yet understood the correct Islamic rules. It is true that this type of company was not customary, but what harm does it do us? These are non-worship matters in which the mind has no room to intervene, whereas in transactions the matter is broad as long as they do not contradict an explicit legal text. But if you know that joint-stock companies today cannot escape violation, then by this consideration it is said: they are not prescribed.
The questioner : To add to the clarification; that is, the joint-stock company, the shares themselves have two values; a nominal value and an actual value. It may be, for example, the value of its shares, for example, one million dinars is the nominal value, and the reality is that it is half a million.
The Shaykh : How do you mean?
The questioner : That is, they offer the shares and say: our company, we want to establish a company with one million dinars, one million shares, the one million dinars will not be real, they will be half a million.
The Shaykh : Okay, why do they do this?
The questioner : By Allah, it is also a violation.
The Shaykh: I understand you.
The questioner : They do this to collect the maximum possible amount of money under the name, a nominal image, meaning through it. We have today, we do not have... they are deceiving people, it is a matter of illusion, the nominal value is something... this is known on the certificate: the nominal value of the share is one dinar, and the actual value is half a dinar, so you, it will be in reality half a dinar, you pay one dinar.
The Shaykh : But as long as... another thing; because the one who wants to lie will not reveal his money.
The questioner : It is not a matter of... this is a custom with them.
The Shaykh : I understood, I am asking: why do they do this? Your answer was: deceiving people. Okay, how is deceiving people and they write it?
The questioner : Deceiving with the large number of people that it is one million dinars.
The Shaykh : Yes, but you are now saying: they write it on the paper.
The questioner : They write on the paper that the nominal value is one dinar, for example, and the actual value is half a dinar.
The Shaykh : We understood, Professor, why do they write it on the paper as long as the intention is deception, and the deception... is revealed?
The questioner : Because the intention of the capital company, as you know, is that they collect the maximum possible amount of money to employ it.
The Shaykh : No problem.
The questioner : This is the goal; collecting money to employ it, you want to pay one dinar and they write for you half a dinar.
The student : But the share remains... one dinar.
The questioner: Huh?
The student : The share remains... .
The questioner : They write for you on the paper: the actual value is half a dinar.
The Shaykh : Why, Professor, we did not get the answer, why do they write it this way and that way? The actual value is such and the nominal value is such; why? There must be something hidden there.
The questioner: Yes.
The Shaykh : As for your explanation that today people...
The questioner : Because the goal, which I understood, the goal of this company is to collect the maximum possible amount of money and exploit it in work.
The Shaykh : Okay, this... the intrinsic value?
The questioner: Yes.
The Shaykh : Is there only that?
The questioner : ... they agree on this... .
The Shaykh : In any case...
The Shaykh : This question is only properly investigated when the company is established on legal principles that do not contradict the Shari'ah; only then is it examined in detail. So, first of all: the question as it is asked today contradicts itself; do joint-stock companies not deal with riba (usury or interest)? You would be the first to say: they deal with riba; so what is the motivation for the question?
The questioner : It is defective.
The Shaykh : Yes?
The questioner : It is defective.
The Shaykh : I did not understand.
The questioner : The company is defective.
The Shaykh : The company is defective, that is one thing.
The Shaykh: The second thing: suppose that a company—perhaps we will find one existing one day—does not deal with riba; we would say: the shares that are offered are a company of the type of mudarabah (profit-sharing partnership) with money; because Zayd participates with ten shares and another with a thousand, and so on. But—also—the issue goes beyond the legal rulings when these shares remain shares that have not yet been converted into any work. We know from reality that any institution or company intended to be established offers its shares in the market; that we have, for example, a thousand shares, the share at ten and the share at a hundred, and so on, and these shares end and the company fills up the value of all the shares it offered, before these funds are converted into, for example, trade, a factory, or anything else, they are offered in the market for sale, and the share that was, for example, priced at ten is either sold for eleven or sold for nine; this is another legal violation; because it is the very riba, an increase or a decrease. And I also believe that there is no company that observes this issue before the shares are converted into a commodity, trade, factory, or anything else.
The Shaykh: Likewise, we keep walking in imagination far away, and we say if we suppose that a company offered the shares and kept the money with it and not in the bank, and started buying the necessities for establishing the factory or for establishing the company, or so on, in this form there is absolutely no obstacle to it; contrary to what the Tahrir Party says; because there is a very important rule, which is: "The default in acts of worship is prohibition except with evidence, and the default in customary matters is permissibility except with evidence"; so these transactions are not acts of worship. The one who wants to prohibit them on the pretext that this was not the type of dealing in the past is, at the very least, narrow-minded, narrow in thinking, has not yet understood the correct Islamic rules. It is true that this type of company was not customary, but what harm does it do us? These are non-worship matters in which the mind has no room to intervene, whereas in transactions the matter is broad as long as they do not contradict an explicit legal text. But if you know that joint-stock companies today cannot escape violation, then by this consideration it is said: they are not prescribed.
The questioner : To add to the clarification; that is, the joint-stock company, the shares themselves have two values; a nominal value and an actual value. It may be, for example, the value of its shares, for example, one million dinars is the nominal value, and the reality is that it is half a million.
The Shaykh : How do you mean?
The questioner : That is, they offer the shares and say: our company, we want to establish a company with one million dinars, one million shares, the one million dinars will not be real, they will be half a million.
The Shaykh : Okay, why do they do this?
The questioner : By Allah, it is also a violation.
The Shaykh: I understand you.
The questioner : They do this to collect the maximum possible amount of money under the name, a nominal image, meaning through it. We have today, we do not have... they are deceiving people, it is a matter of illusion, the nominal value is something... this is known on the certificate: the nominal value of the share is one dinar, and the actual value is half a dinar, so you, it will be in reality half a dinar, you pay one dinar.
The Shaykh : But as long as... another thing; because the one who wants to lie will not reveal his money.
The questioner : It is not a matter of... this is a custom with them.
The Shaykh : I understood, I am asking: why do they do this? Your answer was: deceiving people. Okay, how is deceiving people and they write it?
The questioner : Deceiving with the large number of people that it is one million dinars.
The Shaykh : Yes, but you are now saying: they write it on the paper.
The questioner : They write on the paper that the nominal value is one dinar, for example, and the actual value is half a dinar.
The Shaykh : We understood, Professor, why do they write it on the paper as long as the intention is deception, and the deception... is revealed?
The questioner : Because the intention of the capital company, as you know, is that they collect the maximum possible amount of money to employ it.
The Shaykh : No problem.
The questioner : This is the goal; collecting money to employ it, you want to pay one dinar and they write for you half a dinar.
The student : But the share remains... one dinar.
The questioner: Huh?
The student : The share remains... .
The questioner : They write for you on the paper: the actual value is half a dinar.
The Shaykh : Why, Professor, we did not get the answer, why do they write it this way and that way? The actual value is such and the nominal value is such; why? There must be something hidden there.
The questioner: Yes.
The Shaykh : As for your explanation that today people...
The questioner : Because the goal, which I understood, the goal of this company is to collect the maximum possible amount of money and exploit it in work.
The Shaykh : Okay, this... the intrinsic value?
The questioner: Yes.
The Shaykh : Is there only that?
The questioner : ... they agree on this... .
The Shaykh : In any case...
Source
www.al-albany.com
The Arabic text is copied verbatim from the original source, without any edits.