Companies and leases

The status of the company

The partnership (sharika) is lawful by the Book, the Sunnah and consensus: Zayd ibn Arqam said: "Bara' and I were partners, and we bought silver cash and on credit" (al-Bukhari 2061); Sa'ib ibn Abi Sa'ib was the Prophet's partner before Islam: "Welcome to my brother and my partner, who never despaired and never failed" (reported by Ahmad 15544, al-Hakim); in Abu Dawud's version (4838): "you were my partner, and what a good partner you were". The Prophet also said that Allah is "the third of the two partners as long as neither betrays the other; if one betrays, He departs from between them" (reported by Abu Dawud 3383, judged weak by hadith specialists). Many scholars report consensus on its general lawfulness (Ibn Qudamah, al-Zarkashi, Ibn Hubayra, al-Imrani, al-Mawsili).

The pillars of the company and the two broad kinds

For the majority the pillars are: the formula, the parties, the capital and the work; for the Hanafis only the exchange of offer and acceptance is a pillar. One distinguishes the company of property (one inherited asset: no one disposes of the other's share without permission; selling one's share and delivering the whole without permission carries liability, per al-Qarafi and the Shafi'is) and the company of contract, concluded by choice for profit, which counts four types.

The four types of company

• The 'inan company: the only one agreed upon (Ibn Rushd). Each brings capital, the two capitals are mingled, each is principal in his share and agent in the other's; profit and loss follow the shares. A partner acting without permission must return it and guarantee the loss.
• The mufawada company (Hanafis, Malikis): equality of capital, management and debt, each guaranteeing the other's commitment; delegation is general; if one capital grows before purchase, the mufawada turns into 'inan.
• The company of bodies (abdane): two craftsmen share their work and the profit Allah grants them; accepted by the Hanafis, Malikis and Hanbalis in two forms (joint work or acquiring permissible goods such as wood), rejected by the Shafi'is, each body being distinct and the work unknown; Ibn Taymiyya teaches that no one may prevent people from this practice, a matter of ijtihad and constant usage of Muslims.
• The credit company (wujuh): two trusted people buy on credit upon their creditworthiness alone and share the profit; accepted by the Hanafis, the Malikis (a company upon liabilities), Shafi'i forms and the Hanbalis.

Dissolution of the company

The company is a revocable contract for the majority (Hanafis, Shafi'is, Hanbalis, a Maliki minority): each partner may end it, the Hanafis requiring the partner's knowledge. The death of a partner ends it, the share passing to the heirs, who may continue it by mutual consent; complete madness and fainting also break the contract. If the capital perishes before purchase, the loss rests on its owner before mingling (Hanafis, the widespread Maliki view for like goods) and is shared after mingling.

Practical note on the company

An honest partnership agreement follows exactly these rules: clear shares, defined management authority, proportionate profit and loss, and an organized exit.