Gulf Law for Arab Middleeast Company Law
    
About Us
home
about us
UAE
Iraq
Saudi
Qatar
Jordan
Aeas of Expertise Countries
Links
 

email

 

 
 

Companies in Islamic (Shariah) Law

 

Islamic jurists have defined the word 'company' ("Shirkah" in Arabic) to mean "join together or intermix" and have interpreted it as a legal concept "as a contract between partners in capital and profits". A Shirkah is further elaborated to mean "participation of two or more persons in a certain business with defined amounts of capital according to a contract for jointly carrying out a business and for sharing profits and losses". This concept was recognised from the dawn of Islam and jurists emphasised its importance as a useful method of organising business relations. The corporate personality of a company was implied, particularly in references made to the settlement of the company accounts and the company's profits and losses.

Under the rules of Islamic Law (Sharia), companies are divided into two main classes:

1. Property Companies: this type of company involves the ownership of property and is in turn usually classified into:
    1.1 Voluntary: this company is established when two or more persons agree jointly to own property.

    1.2. Mandatory: this company is established by two or more persons who find themselves in a situation where ownership of property is forced upon them, for example, by inheritance or through endowment.

    2. Contractual Companies : are established on the contract, and are divided into two main categories:

    2.1 'Mufawadha': which when translated literally means 'negotiation' or 'delegation' , and is considered established when the partners have equal shares in the company as well as equal rights and benefits in profits and management.

    2.2 'Aanan': literally translated as 'reins', where the partners' shares are variable and not distributed equally between the members.

In addition to the general categorisation referred to above, contractual companies are classified into three types:
 
    1. Capital Companies: are defined as a company where each of the partners provides a specific share in the capital of the company to conduct a trade together or separately and share in the profits.

    2. Work Companies: established by two or more partners providing efforts as capital for the conduct or performance of a specific work or profession and share in the fees or consideration for such efforts.

    3. Personal Companies: are defined as a company where two or more partners join together to conduct trade based on the trust and goodwill enjoyed by them in the business community. Its establishment does not require the provision of a specific capital. The object of this company is to achieve a profit in the conduct of its business based on such goodwill.

Al Majala had adopted precisely the aforementioned classification of companies. The UAE Federal Courts had also, prior to the application of the Company Law, recognised this classification of companies.

TOP

 

For further information on UAE Company Law and Practice, it is recommended that the full text be referred to. Click on the link to obtain a copy. For specific legal advise, please contact Sabah M A mahmoud or other reputable Law Firm.

 

 

 
Islamic Law (Shariah)

 

LEGAL DISCLAIMER - The information provided by gulf-law.com is not legal advice nor conveyed in the course of an attorney-client relationship, but is intended merely as general information related to legal issues. The links to other sites are for convenience only, and do not imply sponsorship, endorsement, or approval by gulf-law.com, which has no control over and is not responsible for the content found on such sites. Your access to and use of gulf-law.com is subject to additional terms and conditions.

 

 
  

Copyright 2014 Sabah M A Mahmoud, 30 Kingston House South, Ennismore Gardens, London SW7 1NF, UK
Telephone London Office: (+44) 020 7581 667
7 Email sm@gulf-law.com
Telephone Amman Office: P.O. Box 928526 Amman 11190 Mob. +962 79 672 5088
All rights reserved.

No part of this publication may be reproduced or stored or
transmitted without prior permission in writing of the author.