Analysis of the Nature of Joint-Stock Companies and Their Compatibility with Islamic Jurisprudence

Document Type : Original Article

Authors

1 PhD student, Islamic Jurisprudence and Foundations of Islamic Law, University of Ilam, Ilam, Iran.

2 Associate Professor of Islamic Jurisprudence and Foundations of Islamic Law, University of Ilam, Ilam, Iran (Corresponding Author)

3 Associate Professor of Islamic Jurisprudence and Foundations of Islamic Law, University of Ilam, Ilam, Iran.

Abstract

The most significant jurisprudential challenge regarding joint-stock companies lies in identifying their nature and position among Islamic jurisprudential company models, as well as determining whether a joint-stock company is a contractual agreement or merely an organization formed for conducting business with the assets of a group of shareholders. Among jurists and legal experts, there is a lack of consensus on this issue. Even if the theory of joint-stock companies being a contractual agreement is favored, difficulties arise in aligning this company type with jurisprudential company models. Key obstacles to accepting joint-stock companies as contracts include the existence of assets distinct from the shareholders’ personal assets, the independent legal personality of the company, the mandatory regulations governing company management, and shareholders' adherence to majority decisions.
According to contemporary jurists, among Islamic contracts and company models, ‘inan partnerships and mudarabah contracts share the closest structural similarities with joint-stock companies. However, the emphasis of commercial law on selecting board members exclusively from among the shareholders presents a significant challenge to aligning joint-stock companies with mudarabah and ‘inan contracts.
This descriptive-analytical study concludes that while aligning joint-stock companies with the ‘inan partnership is feasible, considering them as a new and innovative partnership contract, based on the principle of validity and freedom to enter into legitimate contracts, is more justifiable than other approaches.

Keywords

References

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Journal of Studies in Islamic Law & Jurisprudence
Volume 16, Issue 35
August 2024
Pages 381-406

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