9 Basic Principles of Partnership for Businesses according to Shariat Mohammediyah

9 Basic Principles of Partnership for Businesses according to Shariat Mohammediyah


In view of the wishes of al-Dai-Ajal Syedna Aali Qadr Mufaddal Saifuddin TUS Mumineen are urged to amend their existing partnership deeds or draft new partnership deeds that adhere to laws and guide Mumineen, al-Tijaraat al-Raabehah has prepared a document to help Mumineen ensure that their partnership deeds are compliant with Shariat.

This article takes you through the main highlights of the document, each point has been discussed in brief here:

Partners and Mutual Agreement

Partnership is the relation between persons by contract who have agreed to share in the profits and loss of a business carried on by all or any of them acting for all.

All decisions regarding the formation of a partnership and operation of the firm or venture should be made by mutual agreement and free will.

Formation, Raza and Resignation

Partners should discuss and present all information regarding the nature of the venture prior to formation. In order to maintain a healthy working relationship and avoid unnecessary disputes, a partnership agreement between partners should be drafted describing the partners, the firm, the venture and all the terms and conditions agreed upon.

Permissible Practices

Any business venture is only valid if the partners involved plan to do a business free from any sort of deception, dishonesty, fraud, gambling, or any other unethical elements.

The partnership should adhere to the governing laws of the nation in which it operates.

Capital Investment and Share of Ownership

Initial capital contributed by each partner should be clearly specified at the time of formation. Any capital invested into a partnership is owned and utilised jointly by the partnership without bias or classification of specific ownership.

Debt of any kind cannot be converted into an investment for partnership. The debt must be repaid as is.

Sharing of Profit and Loss

Profit may be distributed amongst partners according to any ratio agreed upon. It does not need to match the investmentor ownership ratio of the partners.

Profit earned from the venture should be calculated first and then disturbed among partners according to the profit sharing ratio agreed upon. If the venture incurs a loss, the partners will bear the loss in proportion to their investment or ownership ration only.

Liabilities and Debt

The partnership is liable to repay any and all debts or liabilities accumulated by the firm during the normal course of operating the venture. Even after death, a person is obligated and liable to repay all his debts.

Rights and Decision Making

All decisions in the course of operating the business venture should be by mutual consent of all the partners or based on specific stipulation made n the partnership agreement.

As best practice, the partners should establish beforehand a detailed division of work and responsibilities regarding management of the venture and describe it in the agreement

Dissolution of the Partnership

A partnership can be dissolved if:

  1. A partner dies, resigns, or retires or at will, notifies all the partners of his/her intentions to dissolve the partnership.
  2. The purpose or time period for which the partnership was formed is completed.

The partnership deed is a detailed document, to read the entire document click on the link and download the PDF

Mumineen should approach their Aamil Saheb if they require any clarification these documents. Mumineen may also contact al-Tijaarat-al-Raabehah at tr***********@al*******.org

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