Fatwa ID: 02992

Answered by: Maulana Muddasser Dhedhy​

Question:

Assalamu Alaikum Wa Rahmatullah

My question is regarding the zakat on equity.
I had received preferential equity shares from my former employer. It was issued as a free gift in the year 2011.
The company got listed on the stock market in March 2017. The lock-in period allotted by the company for selling the shares was unlocked on 23rd March 2018. Hence I was able to sell part qty of it for buying a house.
    

Around 40% of the equity is lying in the Demat form which I intend to keep for the long term.

My question is on the applicability of Zakat on it. During the locking period, no transaction was allowed with equity. It's only after the locking period got ended (23rd March 2018), I was able to sell it. In that case, I have not completed a lunar calendar cycle.

Please guide me over the applicability of Zakah on it; should you require additional information please let me know.

Answer:

بسم الله الرحمن الرحيم

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

Firstly, it is permissible for an employee of a company or business to accept and utilize equity shares given as a gift. The company’s rewards will only become the owner of the employee after the lock-in period has elapsed and they are able to conduct transactions in the shares.^[1]

Hence, if the lock-in period ended on the 23rd of March 2018, it is from this date that you will start your lunar Zakat year.

It is unclear from your question what the state of the shares was from the time they were allocated to you in 2011 to the time when the company was listed on the stock market in 2017. Was this time (2011-2017) part of the lock-in the period also?  

Only Allah Ta'ala knows best.

Answered by Maulana Muddasser Dhedhy
Checked and approved by Mufti Mohammed Tosir Miah

Darul Ifta Birmingham