Buying Shares in Companies That Have Debts

CategoriesTrade, Business & All Things Money [454]

Fatwa ID: 04937

 

Answered by: Maulana Mohammed Kamran Abid

 

Question:

 

AssalamoAlaykum, For investing in the stock market in a non-Muslim country there are 3 applicable conditions as per this fatwa: http://daruliftabirmingham.co.uk/buying-and-selling-shares/

 

My company sells business software and provides us with discounted stock, and they have some illiquid assets. Therefore, I believe it is halal to invest in and I have got some discounted shares through the company as an employee.

 

However, apps like Zoya and Islamicly say the company is not halal to invest in because it has too much debt. However, nothing about debt is specified in the fatwa. Is it okay for me to continue purchasing discounted stocks from my company?  This gives me a benefit as I can sell them for a higher price than what I buy them for. If it should be avoided, then what about my previous purchases?  If I give away the gains, I will actually be at a loss – because I am now paying more tax due to the benefits I received but I will not actually keep any of the benefits, and I will miss out on the employer gift.  I am enrolled in the program and the next purchase is next week – it may be too late to opt-out for that and may end up with more shares.

 

 

In the name of Allah, the Most Gracious, the Most Merciful

 

 

Answer:

 

Investing in the stock market is permissible only with the conditions mentioned in the fatwa you provided. Mufti Taqi mentions that the scholars are of a difference of opinion regarding the illiquid asset ratio of a company. There are some scholars who are of the opinion of 51%, others have the opinion of 33% ratio.[1] The correct opinion is 33%. Therefore, if the company does not meet these requirements it would not be permissible to invest in that company. For more information please see the link:

What is the Permissible Level of Debt for Companies to have in order to Invest in them?

 

 

Only Allah knows best

Written by Maulana Mohammed Kamran Abid

Checked and approved by Mufti Mohammed Tosir Miah

Darul Ifta Birmingham

 

 

[1] An Introduction to Islamic Finance, pg. 144

 

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