Ruling on Partnership in Commercial Companies

Author: Saudi Fatwa Committee (Lajnah Al-Da'imah)

Principle of Permissibility in Business Transactions​

In Islamic jurisprudence, the default ruling on business transactions and partnerships is that they are halal (permissible) unless there is clear evidence to prove otherwise. A transaction becomes haram only if it involves any of the following:

1. Fraud or Deception:
   
   • Any form of fraud or misrepresentation that leads to unjust gain.
2. Riba (Usury):
   
   • Direct or indirect involvement in interest-based dealings.
3. Unlawful Consumption of Wealth:
   
   • Acquiring wealth through unethical or prohibited means, such as gambling or exploitation.

Assessment of a Company’s Legitimacy​

The permissibility of entering into a partnership with a commercial company depends on:

1. Understanding the Company’s System:
   
   • Examine the company’s operating principles, practices, and structure to ensure they align with Islamic guidelines.
2. Analysis of Financial Dealings:
   
   • Scrutinize whether the company’s dealings include elements prohibited in Shariah, such as riba-based loans, speculative gambling-like activities, or trading in haram goods.

Ruling Based on the Company's Practices​

1. Permissible Partnership:
   
   • If the company’s dealings comply with Shariah principles, such as engaging in halal trade and avoiding prohibited practices, then forming a partnership with such a company is permissible.
2. Prohibited Partnership:
   
   • If the company is involved in haram activities, such as:
     • Usury (riba).
     • Trading in alcohol, pork, or other prohibited goods.
     • Engaging in gambling or speculative practices akin to gambling.
   • In such cases, partnering with the company is not permissible.

Guiding Evidence​

1. Permissibility in Principle:
   
   • Allah says:
     "O you who have believed, do not consume one another's wealth unjustly, but only [in lawful] business by mutual consent."
     [Surah An-Nisa (4:29)]
2. Prohibition of Riba:
   
   • The Prophet Muhammad (ﷺ) said:
     "Allah has cursed the one who consumes riba, the one who gives it, the one who records it, and the witnesses to it."
     [Sahih Muslim, Hadith 1598]

Conclusion​

The permissibility of entering into a partnership with a commercial company depends entirely on the company’s compliance with Shariah principles. If the company’s dealings are halal, partnership is permissible. If there is any involvement in haram practices, partnership becomes impermissible.