Taxes & Accounting

CORPORATION'S IN ISLAMIC LAW JURISTIC PERSONALITY AND LIMITED LIABILITY

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This paper gives a significant and detailed discussion on concept of juridical personality and limited liability. The study of paper presents a distinctive perspective of Islamic scholars with respect to these concepts. I try to explain my claims by
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  “CORPORATION’S IN ISLAMIC LAW”   JURISTIC PERSONALITY AND LIMITED LIABILITY ABSTRACT This paper gives a significant and detailed discussion on concept of juridical personality and limited liability. The study of paper presents a distinctive perspective of Islamic scholars with respect to these concepts. I try to explain my claims by using various arguments and attempts to clarify their contentions which they used to help their opinions and focuses. The paper begins with describing what the corporate limited liability is and at the end lays down conditions through which we may introduce the legal person into Islamic law. Keywords: Islamic Law , Limited Liability (LL), Juristic Personality, Bait-ul-Mal, Waqf, Joint stock, Inheritance under debt, Abd al mazoon. INTRODUCTION: The notion of legal entity comes from common law jurisdiction. The concept was srcinated in the case of Salomon v A Salomon & Co Ltd 1  but in Islamic law different instances welcome the debate among the scholars of muslim world. Idea of limited liability required the consideration of Islamic researchers because of role this concept is played around the world. Our fiqh is incredibly impacted by the advanced corporations, as in past no such consideration was given to these concepts but now the need of  present world requests our muslim community that these ideas have to be analyzed in the light of sharia. Limited liability means the extent to which a person can be made to account at law 2  implies that members from the company not obligated for company’s obligations and liabilities, and not 1  [1896] UKHL 1, [1897] AC 22 2  M C Oliver an d Enid A Marshall. “Company L aw ” (Eleventh edition) 12  completely at risk but only subject to the degree they invest, means creditors do not have access to the personal wealth of the shareholders. Juridical  person is define as a “legal person as any other person, human organization or otherwise, who has rights and obligations at law, i.e. can seek assistance from the court and also  be sued on his name” 3      We have divided arguments into three groups concerning the topic of limited liability and legal personality on the basis of views by scholars and their opinions in this context: 1.   Scholars who hold the view that Islamic law accepts juridical personality and limited liability and give instances of Waqf, Baitul Maal, Joint stock, Inheritance under debt, Abd al Mazoon, to support their arguments. 2.   Group of scholars do not recognize that such a concept exists in Islamic law and support their claim by arguing against the above mentioned examples. 3.   Scholars who think that Islamic law does not accept this idea but after sometime may accept due to the need of society and may limited liability will exist in Islamic law. I support second-party (restricted liability does not exist) and third-party opinions (limited liability will may exist). I try to attempt best to clarify the points that support my statement. MUFTI TAQI USMANI, MUJLISUL ULAMA AND IMRAN AHSAN KHAN NIYAZEE WITH THE PICTURE OF CORPORATION’S JURISTIC PERSONALITY AND THEIR LIMITED LIABILITY IN ISLAM   Mufti Taqi Usmani He in his article “The principle of Limited Liability “explain that juridical personality is closely related with the concept of limited liability so first, we have to see that juridical person which is define as a “legal person as any other pe rson, human organization or otherwise, who has a rights 3  ibid  and obligations at law, i.e. can seek the aid of the court and also be sued on his name”, is acceptable in Islamic law or not. He give examples of Waqf, Bait ul Mall, Joint stock, Inheritance under debt, limited liability of master of a slave to introduce his views that Juridical  personality and limited liability exist in Sharia law According to him, juridical personality and limited liability does not appear to be against the Islamic injunctions. He argues that juridical personality is closely related with the concept of limited liability and gives various examples to introduce his views to strengthen his claim but fail to provide clear shari evidence. He also encourages collective effort of all to find correct sharia view related to this concept since, he says that his discussion and arguments are not the final verdict on the matter, his viewpoints are the initial thinking which required further research. Mujlisul Ulama He claims that separate legal entity and limited liability is not accepted by sharia of Islam. As Mufti sahib said, his thoughts and views points are not the final words on this subject, his options and concepts are not the last words on sharia law, Hence he invited other scholars to support, counter and criticized his ideas and notions about limited liability and juridical person. So, he somehow best recognizes the correct sharia law by countering, denying and criticizing Mufti sahib's claims in respect to the same circumstances as that of Mufti sahib and claim that separate legal entity and its limited liability does not accepted by sharia of Islam. Imran Ahsan Khan Nayzee He explains the difference between human and fictitious personality by defining Dhimmah (the attributes that Allah gives to human beings, due to which they can obtain rights and obligations) and  Personality (attribute that law or state confirm upon “corpus” due to which it is capable of acquiring right and duties).If personality assigns to non-human, fictitious person is created, a concept which is not acknowledge by Islamic law. He additionally says these two terms are  identical. The only difference is that dhimmah (used in fiqh) is wider term than personality (used in law), as dhimmah covers matters relating to the life of hereafter. Fuqaha are completely aware of the concept of "dhimmah to non - human" as legal person, but they don't accept it, since it doesn't work under the system which created by jurist. Fuqaha left the rulers to do ijtihad on the concerned subject and may in future; the concept of juridical  personality will be accepted in Islamic law, with limited dhimmah and under few conditions which can change its basic structure. ISSUES: Articles by various scholars raise certain important questions, such as 1.   Is absolution from debt allowed in any case? 2.   Does Islam accept the idea of Limited Liability? 3.   Is the instance of Waqf, Baitul Maal, Joint stock, Inheritance under debt, Abd al Mazoon has clearly all of the components which juridical personality has and considered as  juridical person in sharia law? 4.   Does juridical personality idea exist in Islam? 5.   I there is connection between the idea of legal entity and limited liability? I endeavor to respond all the above issues independently which may give us better understanding on the subject. ABSOLUTION FROM DEBT  Mufti Taqi Usmani He argued in favor of western conception where absolution from debt in the name of fictitious  personality is justified, he says, In limited liability concept, when a separate legal entity is  declared insolvent than creditors only have claims towards so-called juridical person, only to the assets of fictitious perso nality. If legal entity can’t pay off   debt after its liquidation, than debt cannot be claimed from a company's members even if they have sufficient capital to set off debt.  Mujlisul Ulama He cited a hadith and Quranic verses in his article "The concept of Limited Liability-Untenable in Shariah," which clearly shows his opinion that absolved of debt without paying it is “ kuffaar concept to Islam" and I agree too. Allah in Holy Quran says: “Do not devour one another’s property wrongfully, nor throw it before the judges in order to devour a portion of other’s property sinfully and knowingly.”  (Al-Baqarah: 188)  Author’s statement    There are Quranic verses and Hadith, than no further evidence is required to demonstrate, that absolution from debt is not acceptable to Islam. This idea is entirely contrary to the Islamic law. Prophet (PBUH) said: “Yes, (i.e. His sins are forgiven) if you are firm, since re and facing (the enemy in the battlefield) not turning your back (in flight), except debt. WAQF  Mufti Taqi Usmani He argue that property purchases by Waqf income is indeed property owned by Waqf , same as natural person can own property by the way of contract. Due to this, Waqf considered as separate legal entity and has concept of limited liability.
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