Islamic Concept of Partnership

34 Pages Posted: 25 Dec 2011 Last revised: 2 Jan 2012

Date Written: December 24, 2011

Abstract

“Shirakat” (شراکۃ) is an Arabic word. It is a noun. Its root letters are ش ر ک which means partnership. A partnership deed ( عقد بین المتشارکین) is a document or instrument in which the terms of partnership contract are written and authenticated by the parties. Each one of the party is called a partner (شریک). The partnership firm is called Shirkat (شرکۃ).

Partenrship or shirakat contract signifies the conjunction of two or more persons to carry on a business to share the profits by joint investment as prevalent at the legislative period. It may be a partnership in a specified amount of capital; in labour or contribution of labour and skill; and partnership in credit where not capital is contributed and the partners buy and sell on credit under an understanding that they shall divide the profits. A partnership of mixed character may be in cases of capital and labour, agricultural fields and labour; industrial enterprises and similar things.

Where the contract of partnership is to share capital and profit it is called 'Aqd bayn al-Mutasharikayn (عقد بین المتشارکین). Where partnership is not in profit but in the capital it is called Mudarabat here partnership is neither in capital nor in profit it is called Bidaat (بضاعۃ). The essential element of partnership is joining or mixing up with each other of the capitals. Partnership business is valid according to the Shari`ah.

People used to do their business by forming partnerships during the period of the Messenger of Allah (صلی اللہ علیہ و آلہ وسلم) and the Messenger of Allah (صلی اللہ علیہ و آلہ وسلم) did not object to do so. Rather he (صلی اللہ علیہ وآلہ وسلم) made in prevalent on better terms. The Messenger of Allah (صلی اللہ علیہ و آلہ وسلم) said: Among two partners I am a third partner till they do not commit dishonesty. But when a partner commits dishonesty I exit out of them.

Shirkat and Shirakat are synonyms. People of different kinds and different approaches of minds join in partnerships and run the business by division of work. For Partnership more than one person is needed otherwise it will be no partnership. There must be at least two persons to make a partnership and there my be more than two persons.

Suggested Citation

Mughal, Munir Ahmad, Islamic Concept of Partnership (December 24, 2011). Available at SSRN: https://ssrn.com/abstract=1976624 or http://dx.doi.org/10.2139/ssrn.1976624

Munir Ahmad Mughal (Contact Author)

Punjab University Law College ( email )

(Res.)125-B, Judicial Colony, Lahore
Lahore, Punjab 54000
Pakistan
042-35304847 (Phone)
042-35311498 (Fax)

Superior Law College

(Res.)125-B, Judicial Colony
Lahore, Punjab 54000
Pakistan
0092-42-35304847 (Phone)
0092-42-35311498 (Fax)

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