Question:
Answer:
If the source of income of a company is Haraam e.g. banks, finance and insurance companies, alcohol companies, etc then it will be totally Haraam to sell and purchase shares of such companies and the dividend/profit gained through it will also be Haraam.
If the source of income of a company is Halaal then it will be permissible to sell and purchase the shares of such companies and the dividend/profit will also be Halaal with the following conditions:
1. If the company is paying interest on a loan that it has taken, then the shareholder must some how show his displeasure to the company about their taking this interest based loan. This can be done by either writing a letter to the company stating his displeasure or by making mention of it in the company’s A.G.M. meeting (Annual General Meeting).
2. If the assets of the company is only in cash form and it does not include any furniture, machinery, buildings, etc, then it will only be permissible to sell the shares of such a company at their face value, not more not less. However, if the company’s assets include cash as well as furniture, machinery, building, etc, then it will be permissible to sell the shares at their market value also.
3. Most companies, though their source of income is Halaal, collect interest that accrues on their surplus sum kept in the bank’s saving account which is later included in the dividend. In this case one should first find out as to what percentage of interest the company’s income contains. This information can be obtained from the company’s income statement. The shareholder must then discharge that percentage of the dividend in charity without intending reward. (Islam aur Jadeed Ma’eeshat wa Tijaarat, Page 87-89)
And Allah Ta’ala knows best
Qasim bin Hashim Limbada
Attested to as correct by:
Mufti Muhammad Ashraf
Darul Iftaa
Jameah Mahmoodiyah
Springs
02 August 2004
15 Jumaadul Ukhraa 1425