SUSTAINABILITY OF BUSINESSES VIA SHARIAH-COMPLIANT FRAMEWORK: ANALYSIS OF SHARIAH PRINCIPLES ON CORPORATION

Authors

  • Nazri Ramli PhD Candidate, Faculty of Law and International Relations, University of Sultan Zainal Abidin, Malaysia
  • Zuhairah Ariff Abd Ghadas Professor (PhD), Faculty of Law and International Relations, University of Sultan Zainal Abidin, Malaysia
  • Hartinie Abd Aziz Lecturer (PhD), Faculty of Law and International Relations, University of Sultan Zainal Abidin, Malaysia.

DOI:

https://doi.org/10.31436/iiumlj.v31i2.820

Keywords:

Corporation, Separate Legal Entity, Sharikah, Shariah

Abstract

Corporation under common law lies within the doctrine of corporate personality which entails that corporation is recognised as a separate legal person distinct from its constituents. As a new form of business vehicle that supports sustainability agenda and with the recent enormous and instant developments in the Shariah compliance businesses sector, the majority of contemporary Muslim scholars have discussed and recognised it through the concept of sharikah. Nonetheless, such recognition is contentious as sharikah is a contractual business entity inseparable from its partners. Furthermore, accepting this corporation under the sharikah without fully dissecting its legal attributes and the implications of running such a business entity not only contravenes both the legal principles of corporation and Islamic principles of sharikah, but also creates doubt as to the legitimacy of a Shariah-compliant business registered under this legal concept. This article analyses the legal concept of corporation under the common law and compares it with the concept of sharikah under Shariah. The discussion reveals that the recognition of corporation by the contemporary Muslim scholars under the sharikah concept is misleading and raised legal complications under the company law due to great differences in terms of nature, concept, and structures. This article adopts doctrinal and comparative analysis research methodology. The article concludes that corporation may be recognised under the Shariah subject with certain modifications to the former’s legal structures to be compatible with the Islamic principles of sharikah.

Metrics

Metrics Loading ...

References

Ali Haidar, Durar Al-Hukkam Sharh Majallah Al-Ahkam (Dar Al-`Alim Al-Kutub, 2003), 5.

A’thiyyah Abdullah A’thiyyah Ramadhan, Mawsua’h Al-Qawai’d Al-Fiqhiyyah Al-Munazdamah Li Al-

Abbasi, Muhammad Zubair. “Legal Analysis of Agency Theory: An Inquiry into the Nature of Corporation,” International Journal of Law and Management 51, no. 6 (2009): 415, https://doi.org/10.1108/17542430911005936.

Abd Al-Awwal `Abidin Muhammad Basyuni, Mabda’ Hurriyyat Tadawul Al-Ashum Fi Sharikat Al-Musahamah (Dar Al-Fikr Al-Jamii’e, 2008), 14.

Abdul Aziz Al-Khayyat, Al-Sharikat Fi Al-Shariah Al-Islamiyyah Wa Al-Qanun Al-Wadi’e, 4th edn (Riyadh, Saudi Arabia: Muassasah Al-Risalah, 1994), 161-162.

Abdul Majid Salih Abdul Aziz Al-Mansur, Iflas Al-Sharikat Wa Atharuhu Fi Al-Fiqh Wa Al-Nidzham, 1st edn (Vol 1, Dar Kunuz Ishbilia Li Al-Nasr Wa Al-Tawzi’, 2012), 66.

Abdullah Muhammad Al-Haqil, “Al-Masuliyyah Al-Mahdudah Fi Al-Sharikat Dirasah Ta’siliyyah Tatdbiqiyyah,” Majallah Al-`Adl 25 (2019), 347-349.

Abdullah, Luqman, Muhammad Ikhlas Rosele, and Wan Marhaini Wan Ahmad, “The Concept of Legal Entity from the Islamic Law Perspectives,” Pertanika Journal of Social Sciences and Humanities 28(4) (2020): 3215-3217, https://doi.org/10.47836/PJSSH.28.4.39.

Abu Dawud Al-Sijistani, “Sunan Abi Dawud, Kitab Al-Buyu’, hadith 3833, accessed 26 April 2023, https://sunnah.com/abudawud:3383.

Ahmad Al-Saidq Al-Bashir, “Al-Sharikah Fi Al-Fiqh Wa Al-Qanun” (Jami`ah Al-Quran Al-Karim wa Al`Ulum Al-Insaniyah Sudan, 1999). 207-208.

Ahmad Al-Zarqa’, Mustafa. Al-Madkhal Ila Nadzariyyah Al-Iltizam Al-A’mah Fi Al-Fiqh Al-Islami, 1st edn (Damascus, Syria: Dar Al-Qalam, 1999), 198-199.

Ahmad Kalib, Muhammad. Al-Khorasoh Mafhumuha Wa Ma’ayiru Ihtisabiha Wa Tadbiqotuha Fi Al-Fiqh Al-Islami (Dar Al-Nafais, 2010).

Ahmad Muhammad Al-Khalil, Al-Ashum Wa Al-Sanadat Wa Ahkamuha Fi Al-Fiqh Al-Islami, 1st edn (Jeddah, Saudi Arabia: Dar Ibn Al-Jawzi, 2002), 129-133.

Ahmed, Habib. “Islamic Law, Investors’ Rights and Corporate Finance,” Journal of Corporate Law Studies 12(2) (2012): 384, https://doi.org/10.5235/jcls.12.2.367.

Ali Al-Qarahdaghi, A’li Mahyuddin. Buhuth Fi Fiqh Al-Bunuk Al-Islamiyyah, 1st edn, (Vol 6, Isdarat Wazarah Al-Awqaf wa Al-Shuun Al-Islamiyyah Qatar, 2010), 217.

Ali Al-Qarahdaghi, A’li Mahyuddin. Mabda’ Al-Redha Fi Al-Uqud, Dirasat Muqoronah Fi Al-Fiqh Al-Islami, 2nd edn (Vol 1, Beirut, Lebanon, Dar Al-Bashair Al-Islamiyyah, 2002), 353.

Al-Khafif, A’li. Al-Sharikat Fi Al-Fiqh Al-Islami: Buhuth Muqaranah (Dar Al-Fikr Al-Arabi, 2009), 123-124.

Amin Ayub, Zainal, Zuryati Mohamed Yusoff, and Ahmad N Azrae, “Separate Legal Entity under Syariah Law and Its Application on Islamic Banking in Malaysia: A Note,” International Journal of Banking and Finance 6, no. 2 (2008): 145.

Arif Abd Ghadas, Zuhairah and Hartinie Abd Aziz, “Legal Framework of Shari’ah Corporations in Malaysia: Special Reference to Waqf Corporation,” Journal of Modern Accounting and Auditing 13, no. 3 (2017): 121–122, https://doi.org/10.17265/1548-6583/2017.03.004.

Arif Abd Ghadas, Zuhairah, Nasarudin Abdul Rahman and Halyani Hassan, “Shari’ah Corporation’: The Legal Entity of Corporation from the Malaysian Law and Shari’ah Perspective,” International Journal of Liability and Scientific Enquiry 6, no. 4 (2013): 234.

Ariff Abd Ghadas, Zuhairah and Engku Ali, Engku Rabiah Adawiyah, “The Development of Partnership Based Structure In Comparison To the Concept of Musharakah (Sharikah) with Special Reference to Malaysia,” Journal of Islam in Asia 8(2) (2012): 307.

Ariff Abd Ghadas, Zuhairah and Hartinie Abd Aziz, “Legal Framework of Corporation and Shirkah Al-Inan : A Comparison,” International Journal of Law and Interdisciplinary Legal Studies, (2018): 19–27, 26.

Beuerle, Carsten Gerner and Michael Anderson Schillig, Comparative Company Law (Oxford University Press, 2019), 3.

Chan, Wai Meng, Essential Company Law in Malaysia, Navigating The Companies Act 2016 (Malaysia: Thomson Reuters, 2017), 64.

E. Rutledge, Thomas. “A Corporation Has No Soul—The Business Entity Law Response to Challenges to the Contraceptive Mandate of the PPACA,” William & Mary Business Law Review 5, no. 1 (2014), 20-21.

El-Gari, Muhammad Ali. “Al-Takyif Al-Fiqhi Li Ashum Sharikat Al-Musahamah,” in 6th Shura Fiqh Conference 2015 (Kuwait, 2015), 197, http://shura.com.kw/conferenceDesc.asp?pageID=21&confID=27.

El-Gari, Muhammad Ali. “Athar Al-Ikhtilaf Baina Al-Shakhsiyyah Al-Tabi`iyyah Wa Al-I’tibariyyah Fi Al-Ahkam Al-Fiqhiyyah Li Mustajiddat

Al-Masrafiyyah Al-Islamiyyah,” in 5th Shura Fiqh Conference 2013 (Kuwait, 2013), 278.

Griffin, Stephen. Company Law Fundamental Principles, 4th edn (Pearson Longman, 2006), 1.

Hassan, Ghadas, and Rahman, “‘The Myth of Corporate Personality’: A Comparative Legal Analysis of the Doctrine of Corporate Personality of Malaysian and Islamic Laws.” 193.

Hassan, Halyani , Zuhairah Ariff Abd Ghadas, and Nasarudin Abdul Rahman, ‘The Myth of Corporate Personality’: A Comparative Legal Analysis of the Doctrine of Corporate Personality of Malaysian and Islamic Laws,” Australian Journal of Basic and Applied Sciences 6, no. 11 (2012): 191–192.

I’la’ Al-Din Al-Za’tari, Mawsua’h Fiqh Al-Mua’malat Al-Maliyyah Al-Muqoron (Damascus, Syria: Dar Al-Usoma’, 2012), 466.

Islamic Fiqh Academy, Resolutions and Recommendations of The Council of the Islamic Fiqh Academy 1985-2000, 1st edn (Islamic

Development Bank, 2000), 130.

Kamal Fahmi, Husain “Al-Sharikat Al-Hadithah Wa Al-Sharikat Al-Qabidhah,” in Majallat Majma’ Al-Fiqh Al-Islami Li Mu’tamar Majma’

Al-Fiqh Al-Islami, 14th Sess. (Saudi Arabia: Munadzamah Al-Mu’tamar Al-Islami, 2003), 464.

Kershaw, David. Company Law in Context Text and Materials, 2nd edn (Oxford University Press, 2012), 30.

Khan Nyazee, Imran Ahsan. Islamic Law of Business Organization: Corporations (India: Adam Publishers & Distributors, 2010), 114-117.

Loh, Siew Cheang, Corporate Powers Accountability, 3rd edn (LexisNexis Malaysia, 2018), 684-685.

Lowry, John and Arad Reisberg, Pettet’s Company Law: Company Law & Corporate Finance, 4th edn (Pearson Longman, 2012), 41.

M Murali, Keerthan and Arya R, “A Study on The Concept of Juristic Personality,” International Journal of Pure and Applied Mathematics 120, no. 5 (2018): 99.

M. Blair, Margaret. “The Neglected Benefits of the Corporate Form: Entity Status and the Separation of Asset Ownership from Control,” 2004, 46, https://ssrn.com/abstract=563307.

M. Hafeez, Malik. “An Analysis of Corporate Entity and Limited Liability in Islamic and Western Perspectives of Corporate Governance,” International Journal of Business, Economics and Law 2, no. 3 (2013), 104.

Mallat, Chibli “Commercial Law in the Middle East: Between Classical Transactions and Modern Business,” The American Journal of Comparative Law 48 (2000), 113.

Mohd Sulaiman, Aiman Nariman and Effendy Othman, Malaysia Company Law: Principles and Practices, 3rd edn (Malaysia: Wolters Kluwer, 2021), 62.

Mohiddin, Abdul Ghadas, and Ramli, “Developing Shariah Compliant Corporation: An Appraisal on The Rights and Liabilities of Members under The Malaysia Law and Shariah.” 65.

Mohiddin, Mas Nooraini, Zuhairah Ariff Abdul Ghadas, and Nazri Ramli, “Developing Shariah Compliant Corporation: An Appraisal on The Rights and Liabilities of Members under The Malaysia Law and Shariah,” Journal of Nusantara Studies 6, no. 1 (2021): 66–67, https://doi.org/http://dx.doi.org/10.24200/jonus.vol6iss1pp59-72.

Mua’malat Al-Maliyyah Al-Islamiyyah Wa Dawruha Fi Tawjih Al-Nudzm Al-Mua’sirah (Dar Al-Iman, Iskandairyah, 2007), 461.

Muhammad Barak Al-Fawzan, Al-Ahkam Al-`Ammah Li Al-Sharikah Dirasat Muqaranah Thibqan Li Nidzam Al-Sharikah Al-Saudi `Am 1437 Hijri, 2nd edn. (Maktabah Al Qanun wa Al-Iqtisad, 2018), 16.

Paddy Ireland, “Company Law and the Myth of Shareholder Ownership,” The Modern Law Review 62, no. 1 (1999): 45.

Pettet, Ben. Company Law, The Law Teacher, 2nd edn, vol. 17 (Pearson Longman, 2005), 23, https://doi.org/10.1080/03069400.1983.9992603.

Quintana Adriano, Elvia Arcelia. “The Natural Person, Legal Entity or Juridical Person and Juridical Personality,” Penn State Journal of Law & International Affairs 4, no. 1 (2015): 366.

Rizkiah, Siti Kholifatul and Fajri Matahati Muhammadin, “A Critical Examination towards the Islamic Discourse on ‘Limited Liability,’” UUM Journal of Legal Studies 11(1) (2020): 28.

Robe, Jean-Philippe. “The Legal Structure of the Firm,” Accounting, Economics, and Law 1, no. 1(5) (2011), 27, https://doi.org/10.2202/2152-2820.1001.

Sadique, Muhammad Abd Al-Rahman. Essentials of Musharakah and Mudarabah: Islamic Texts on Theory of Partnership (Kuala Lumpur: IIUM Press, 2009), 5.

Saleem, Muhammad Yusuf. Islamic Commercial Law (John Wiley & Sons Singapore, 2013), 97.

Saleh, Nabil. “Arab International Corporations: The Impact of the Shari’a,” Arab Law Quarterly 8, no. 3 (1993), 181.

Salih Zabin Al-Marzuqi Al-Baqmi, Sharikat Al-Musahamah Fi Al-Nidzam Al-Saudi (Saudi Arabia: Jamia’h Umm Al-Qura, 1987), 214-215.

Salih Zabin Al-Marzuqi Al-Baqmi, Sharikat Al-Musahamah Fi Al-Nidzam Al-Saudi Dirasat Muqabalah Bi Al-Fiqh Al-Islami, 1st edn (Obeikan, 2019), 149-150.

Talbot, Lorraine Talbot. Critical Company Law, 2ndst edn (Great Britain: Routledge, 2016), 108.

Wahbah Al-Zuhaili, Al-`Uqud Al-Musammah Fi Qanun Al-Mu`amalat Al-Madaniyah Al-Imarati Wa Al-Qanun Al-Madani Al-Urduni (Damascus, Syria: Dar Al-Fikr, 2014), 171.

Wahbah Al-Zuhaili, Al-Fiqh Al-Islami Wa Adillatuhu, Vol. 4, (Damascus, Syria: Dar Al-Fikr, 1986), 881.

Wahbah Al-Zuhaili, Al-Mua’malat Al-Maliyyah Al-Mua’sirah (Damascus, Syria: Dar Al-Fikr, 2002), 129.

Youseif Al-Qassam. M. Al-Zahrani, “Rights of Shareholders under Saudi Company Law 1965” (Brunei University, 2013), 66, 73.

Yusuf Abdullah Al-Shubaili, “Qadhaya Mua’sirah Fi Al-Zakat, Zakat Al-Duyun Al-Tijariyyah Wa Al-Ashum Al-Mamlukah Li Al-Sharikat Al-Qabidhah,” in Buhuth Nadwah Al-Barakah Al-Hadiyah Wa Al-Thalathin Li Al-Iqtisod Al-Islami, 1st edn (Majmua’h Al-Barakah Al-Masrafiyyah, 2010), 29.

Yusuf Abdullah Al-Shubaili, Abhath Fi Qadhaya Maliyyah Mu`asirah (Dar Al-Maiman Li Al-Nashr Wa Al-Tawzi’, 2020), 33-54.

Downloads

Published

2023-12-11

How to Cite

Ramli, N. ., Abd Ghadas, Z. A., & Abd Aziz, H. (2023). SUSTAINABILITY OF BUSINESSES VIA SHARIAH-COMPLIANT FRAMEWORK: ANALYSIS OF SHARIAH PRINCIPLES ON CORPORATION. IIUM Law Journal, 31(2), 287–314. https://doi.org/10.31436/iiumlj.v31i2.820