12.7 Dissolving the Company

The company contract is one of the contracts which is allowed by Shar’a. It becomes void by the death of any partner or his becoming insane or if He was declared incompetent and put under guardianship, if it is a company consisting of two persons. Dissolution of the company by one of the two partners is valid because it is a permissible contract, which is annulled in the same way as deputation (Al-Wikala). If one of the partners dies leaving behind a mature inheritor, He has the option to continue with the company and his partner has to permit Him to dispose (Tassaruf) in the company. However, He also has the option to demand dissolution of the company. If one of the partners demands dissolution of the company then the other partner must accept his request. If they were more than two partners, and one of them demanded the dissolution of the company and the rest were happy to continue with the company, then the existing company would be dissolved and renewed between the remaining partners. However, there is a difference between the Mudharaba company and the other types of companies regarding the dissolution. In the Mudharaba company, if the worker demanded the sale of the company and the Mudharib demanded division, then the demand of the worker will be accepted because his right is in the profit which will not be known except when selling. However, in the other types of company, if one partner demanded division and the other demanded sale of the company, the demand of division is accepted rather than that of sale.

Superior Economic Model : Islamic System

Download Original eBook (PDF) : The Economic System in Islam.pdf