The Concept in Companies Ordinance, 1984 Does Not Appear to be Against The Injunctions of Islam

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The concept in Companies Ordinance, 1984 does not appear to be against the Injunctions of Islam

Part 1

By

S J Tubrazy

The concept of a company as provided under section 2(7) of the Companies Ordinance, 1984 does not appear to be against the Injunctions of Islam. A company formed and registered under the Companies Ordinance, 1984 has a legal status of legal person and not a natural person with the following characteristics:–

(a) It can acquire any property in any capacity (i.e. as an Owner, Lessee, Pawnee and Mortgagee etc.)

(b) It can alienate its property to any person L any manner.

(c) It can sue and be sued on its own name.

(d) It can manage its property or affairs, subject to its Articles of Association.

(e) It can incur financial liabilities and acquire financial rights.

In Islam there are three such Legal persons i.e. Baitul Mal, Waqf and Masjid having all the afore-mentioned characteristics.

(ii) The concept of Company limited by shares as given under section 2(8) of the Ordinance is not repugnant to the Injunctions of Islam. It possesses the status of an Institution, which is not against Islam. A company limited by share is formed by the Association of persons subscribing different number of shares of equal denomination. Their liability is limited to the extent of shares subscribed, but the liability of the Company as such is unlimited.

The legal personality of a Company has unlimited liabilities to the creditors of the Company. It does not, therefore, offend the Injunction of Islam, as laid down in the Holy Quran and Sunnah of the Holy Prophet. As far as the rules of Partnership contained in the books of Fiqh, are concerned, they were adopted by the early jurists according to the Commercial practices of their age.

(c) The concept of a company limited by shares as given under section 2(8) of the Companies Ordinance, 1984 is not against the Injunctions of Islam. It is further submitted that company limited by shares is also an institution, which is not against the Injunctions of Islam. A company limited by shares is formed by association of persons subscribing different numbers of share of equal denotation. Their liability is limited to the shares subscribed but the liability of the company formed as such is unlimited.

(d) The legal personality of a company is unlimited by liability to the creditors of the company, it does not, therefore, offend any. Injunction of Islam as laid down in the Holy Quran. As far as the Islamic rules of partnership contained in books of Fiqah are concerned, these were adopted by the early Jurists according to the commercial practice of their ages.

(e)(i) The concept of company limited by guarantee as given under section 2(9) of the Ordinance, 1984 does not appears to be against the Injunction of Islam.

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