Is it Permissible to Own Shares in My Employer’s Company?

shareholder

Question:

I have shares in a company for which I am an employee.  We received shares as part of a saveshare scheme.  Is it permissible to be a shareholder and an employee of the same company?

In the Name of Allah, the Most Gracious, the Most Merciful.

As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.

The Answer:

It is permissible to own shares in the company you are employed in.  

The Fiqh (jurisprudence of the answer):

The risks and rewards of each contract is independent.  The role as a shareholder is independent and exogenous to the role as an employee.  Dividends received as a shareholder is dependent on the number of shares and performance of the company, whereas, the salary received is based on one’s own performance and services delivered in the company.  In addition, a shareholder can liquidate his shares and still continue to work as an employee.  In the same manner, an employee can resign from work and keep his shares in the company.  Therefore, the agreements are independent with the rewards and risks of each arrangement independent of the other.

The wisdom of the law:

Note: The law is not based on wisdoms.  The wisdoms are some benefits of the law.  It is possible that not all said wisdoms are found at a given time.  The absence of any or all wisdoms will not change the ruling or law.  The law is not deduced nor determined through wisdoms.  Wisdoms are enumerated to complement rationale minds.

The jurists prohibited a scenario where a shareholder or partner in a company is guaranteed a return or earning and as a result bears no risk on his capital investment.  Risk is necessary to gain reward in a monetary transaction or arrangement.  Reward without any risk is injustice and inequality which the Shariah has categorically prohibited.

And Allah Ta’ālā Alone Knows Best

Mufti Faraz Adam al-Mahmudi,
www.darulfiqh.com

 

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