This article, the third in the series on the Company Structure in Islam, explains the second form of partnership in Islam – the Company of Bodies (Al-Abdan).
The Laws of Partnership (Companies) in Islam
The Company of Equal (Al-'Inan)
Definition of Sharikat al-Abdan
Al Sarkhasi (May Allah have mercy on him) says in al-Mabsut Vol II: ...when two workmen participate in the acceptance of work, like tailors or butchers and so on. It is called sharikat al-abdan, because they perform manual labour and it is (also) called sharkat al-sana’i because their capital is their skill.
Shaikh Taqiuddin an-Nabhani (May Allah have mercy on him) states in The Economic System in Islam:
This is a company in which two or more persons participate by their bodies (effort) only, without their capital. They share in that which they gain by their labour, regardless of whether this effort is intellectual or physical in nature.
Examples of al-abdan are partnerships between engineers, doctors, fishermen, porters, carpenters, car drivers and the like, if they work using their intellectual or physical skills or expertise and divide any profit amongst themselves.
Evidence for Sharikat al-Abdan
This form of company is allowed due to what Abu Dawud and al-Athram narrated from Abu 'Ubaydah from his father, 'Abdullah ibn Mas'ud, who said: "I shared with 'Ammar ibn Yasir and Sa'ad ibn Abu Waqqas in whatever we gained at the day of Badr. Sa'ad came with two captives, while 'Ammar and I brought nothing" and the Messenger of Allah (SalAllahu alaihi wasallam) consented to this to both of them. Ahmad ibn Hanbal said: "The Messenger of Allah (SalAllahu alaihi wasallam) associated them together."
Shaikh Taqiuddin an-Nabhani (May Allah have mercy on him) in the book The Economic System in Islam states that this Hadith is explicit evidence about the partnership of bodies i.e. a group of the Sahabah were permitted to fight against the enemies, and then to divide amongst themselves the booty if they won the battle.
Roles and Responsibilities of the Partners
It is not necessary that the partners be of the same craft or trade, nor that they are all craftsmen. It is allowed for people of different crafts, trades, professions and expertise to associate in any allowable (Halal) form of profit.
The Hanafi scholar Al-Kasani explained in Bada’i al Sana’I that similarity of profession was not necessary …because entitlement to compensation in this type of sharikah is based upon being lliable for the performance of work accepted). They are both liable for amal, whether the work is identical or different.
Shaikh Taqiuddin an-Nabhani (May Allah have mercy on him) states that “Their partnership is valid (Sahih) just as if they were of the same craft.”
It is also acceptable for the partners to perform a particular role in the company, so that for example one administers the company in an operational capacity, another manages the finances and the third works physically by his hands. This means that it is allowed for labourers to associate with other labourers, administrators, clerks and guards, and they can all become partners in a factory. However, it is stipulated that the work they associate together in for the purpose of making a profit be Halal. If the type of work is Haram, then to form a company undertaking such work is forbidden. Abu Yusuf related from Abu Hanifah, saying, “This sharikah is valid in each thing in which agency (wakalah) is valid and is not valid in things in which agency is not valid.
Furthermore anyone of the partners may accept work on behalf of the company. In Al Majallah al-Ahkam al-‘Adaliyyah, a ‘Uthmani Hanafi Shari’ah-Court Text, section 1386 it is mentioned that each partner has a right to accept work on behalf of the partnership. Each of the partners also has the right to collect all of their wages from their employer, and to demand the price of the goods they manufactured from a prospective purchaser.
Similarly, the one who employed them or the one who bought goods from them has the right to pay all wages or to pay the whole price of the goods to anyone of them. He will be cleared of responsibility once he has made the payment to any one of them. The Majallah in section 1387 states the customer is absolved of this liability (the claim for wages) by paying either one of them.
Even if only one of the partners worked, the income is still divided amongst all of them, because the work is guaranteed by all of them together, and through their joint responsibility for the work. The wage in other words, deserves to be shared as the responsibility is carried by all of them. The Majallah in section 1387 states that each partner is the agent of the other in the acceptance of work. For the work that is accepted by one of them, performance is binding upon him as well as his partner. ... Thus the work accepted by one of the partners may be demanded by the customer from either one he chooses. Each partner is legally bound for the performance of the work. He does not have the right to say: "This work was accepted by my partner and I have nothing to do with it." (Similarly mentioned in Al-Marghinani, al-Hidayah vol 3, Ibn Numjaym al Bahr al Raiq vol 5).
Right to Disposal
Shaikh Taqiuddin an-Nabhani (May Allah have mercy on him) mentions that “None of them (the partners) is allowed to deputise on his behalf a person as partner in the company or to employ a person to do the work on his behalf as a partner.” The partner himself must be the one who handles the work directly as the contract stipulates this in this type of company. The disposal of each partner would be on behalf of the company, and every one of them is bound by the work accepted by his partner.
Al Khirashi, a Maliki Scholar, in Sharh al-Mukhtasar Vol 6 states: “if one of the parties accepts something for working on it, his partner is equally liable for performing work on it, however there is no requirement for joint acceptance of work. If the thing accepted is destroyed, the liability is shared by both parties..”
Each partner is allowed to hire employees and such hiring would be by the company and for the company, even if only one of the partners handled the employment. The employee is employed by the company and is not an individual partner's personal assistant, deputy, agent or employee.
Distribution of Profit
The profit in the company of bodies is distributed according to the agreement of the partners, whether equally or preferentially. The Majallah Section 1388 states that the partners divide the profits among them in accordance with the ratios stipulated, whether equal or unequal.
Shaikh Taqiuddin an-Nabhani (May Allah have mercy on him) further explains “For it is that which produced the profit and since it is allowed for the partners to differ in work, it is allowed that they differ in profit which is derived from the work.“
In the next article the Company of Body and Capital (Mudharaba) will be explained.
Habib ur-Rahman
Khilafah.com Journal
03 Jumaad Al-Thani 1424 Hijri
01 August 2003
Click below to E-mail the author of this article with your questions and comments:
habib@khilafah.com
------------------
The Laws of Partnership (Companies) in Islam
The Company of Equal (Al-'Inan)
Definition of Sharikat al-Abdan
Al Sarkhasi (May Allah have mercy on him) says in al-Mabsut Vol II: ...when two workmen participate in the acceptance of work, like tailors or butchers and so on. It is called sharikat al-abdan, because they perform manual labour and it is (also) called sharkat al-sana’i because their capital is their skill.
Shaikh Taqiuddin an-Nabhani (May Allah have mercy on him) states in The Economic System in Islam:
This is a company in which two or more persons participate by their bodies (effort) only, without their capital. They share in that which they gain by their labour, regardless of whether this effort is intellectual or physical in nature.
Examples of al-abdan are partnerships between engineers, doctors, fishermen, porters, carpenters, car drivers and the like, if they work using their intellectual or physical skills or expertise and divide any profit amongst themselves.
Evidence for Sharikat al-Abdan
This form of company is allowed due to what Abu Dawud and al-Athram narrated from Abu 'Ubaydah from his father, 'Abdullah ibn Mas'ud, who said: "I shared with 'Ammar ibn Yasir and Sa'ad ibn Abu Waqqas in whatever we gained at the day of Badr. Sa'ad came with two captives, while 'Ammar and I brought nothing" and the Messenger of Allah (SalAllahu alaihi wasallam) consented to this to both of them. Ahmad ibn Hanbal said: "The Messenger of Allah (SalAllahu alaihi wasallam) associated them together."
Shaikh Taqiuddin an-Nabhani (May Allah have mercy on him) in the book The Economic System in Islam states that this Hadith is explicit evidence about the partnership of bodies i.e. a group of the Sahabah were permitted to fight against the enemies, and then to divide amongst themselves the booty if they won the battle.
Roles and Responsibilities of the Partners
It is not necessary that the partners be of the same craft or trade, nor that they are all craftsmen. It is allowed for people of different crafts, trades, professions and expertise to associate in any allowable (Halal) form of profit.
The Hanafi scholar Al-Kasani explained in Bada’i al Sana’I that similarity of profession was not necessary …because entitlement to compensation in this type of sharikah is based upon being lliable for the performance of work accepted). They are both liable for amal, whether the work is identical or different.
Shaikh Taqiuddin an-Nabhani (May Allah have mercy on him) states that “Their partnership is valid (Sahih) just as if they were of the same craft.”
It is also acceptable for the partners to perform a particular role in the company, so that for example one administers the company in an operational capacity, another manages the finances and the third works physically by his hands. This means that it is allowed for labourers to associate with other labourers, administrators, clerks and guards, and they can all become partners in a factory. However, it is stipulated that the work they associate together in for the purpose of making a profit be Halal. If the type of work is Haram, then to form a company undertaking such work is forbidden. Abu Yusuf related from Abu Hanifah, saying, “This sharikah is valid in each thing in which agency (wakalah) is valid and is not valid in things in which agency is not valid.
Furthermore anyone of the partners may accept work on behalf of the company. In Al Majallah al-Ahkam al-‘Adaliyyah, a ‘Uthmani Hanafi Shari’ah-Court Text, section 1386 it is mentioned that each partner has a right to accept work on behalf of the partnership. Each of the partners also has the right to collect all of their wages from their employer, and to demand the price of the goods they manufactured from a prospective purchaser.
Similarly, the one who employed them or the one who bought goods from them has the right to pay all wages or to pay the whole price of the goods to anyone of them. He will be cleared of responsibility once he has made the payment to any one of them. The Majallah in section 1387 states the customer is absolved of this liability (the claim for wages) by paying either one of them.
Even if only one of the partners worked, the income is still divided amongst all of them, because the work is guaranteed by all of them together, and through their joint responsibility for the work. The wage in other words, deserves to be shared as the responsibility is carried by all of them. The Majallah in section 1387 states that each partner is the agent of the other in the acceptance of work. For the work that is accepted by one of them, performance is binding upon him as well as his partner. ... Thus the work accepted by one of the partners may be demanded by the customer from either one he chooses. Each partner is legally bound for the performance of the work. He does not have the right to say: "This work was accepted by my partner and I have nothing to do with it." (Similarly mentioned in Al-Marghinani, al-Hidayah vol 3, Ibn Numjaym al Bahr al Raiq vol 5).
Right to Disposal
Shaikh Taqiuddin an-Nabhani (May Allah have mercy on him) mentions that “None of them (the partners) is allowed to deputise on his behalf a person as partner in the company or to employ a person to do the work on his behalf as a partner.” The partner himself must be the one who handles the work directly as the contract stipulates this in this type of company. The disposal of each partner would be on behalf of the company, and every one of them is bound by the work accepted by his partner.
Al Khirashi, a Maliki Scholar, in Sharh al-Mukhtasar Vol 6 states: “if one of the parties accepts something for working on it, his partner is equally liable for performing work on it, however there is no requirement for joint acceptance of work. If the thing accepted is destroyed, the liability is shared by both parties..”
Each partner is allowed to hire employees and such hiring would be by the company and for the company, even if only one of the partners handled the employment. The employee is employed by the company and is not an individual partner's personal assistant, deputy, agent or employee.
Distribution of Profit
The profit in the company of bodies is distributed according to the agreement of the partners, whether equally or preferentially. The Majallah Section 1388 states that the partners divide the profits among them in accordance with the ratios stipulated, whether equal or unequal.
Shaikh Taqiuddin an-Nabhani (May Allah have mercy on him) further explains “For it is that which produced the profit and since it is allowed for the partners to differ in work, it is allowed that they differ in profit which is derived from the work.“
In the next article the Company of Body and Capital (Mudharaba) will be explained.
Habib ur-Rahman
Khilafah.com Journal
03 Jumaad Al-Thani 1424 Hijri
01 August 2003
Click below to E-mail the author of this article with your questions and comments:
habib@khilafah.com
------------------
Rasulullah (Sallallahu Alaihi Wasallam) did indeed prophecise the Khilafah’s return when he said:
"The Prophethood will last among you for as long as Allah wills, then Allah would take it away. Then it will be (followed by) a Khilafah Rashida (rightly guided) according to the ways of the Prophethood. It will remain for as long as Allah wills, then Allah would take it away. Afterwards there will be a hereditary leadership which will remain for as long as Allah wills, then He will lift it if He wishes. Afterwards, there will be biting oppression, and it will last for as long as Allah wishes, then He will lift it if He wishes. Then there will be a Khilafah Rashida according to the ways of the Prophethood," then he kept silent.
[Musnad Imam Ahmad (v/273)]
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