The concept of shareholding is central to modern corporate structures. Shareholders are viewed as owners with proprietary interests and risk bearers in the company. However, this view faces criticisms in company law for two reasons. First, shareholders do not own the company's assets due to its separate legal person status. Second, despite having rights linked to ownership, shareholders benefit from limited liability protection. Given the recent emergence of Shariah-compliance sector that adopts this business vehicle, a company is discussed under the concept of sharikah from Shariah perspectives where the shareholders are viewed as partners in the company who participated in the latter’s capitals and profits. Nevertheless, such view is contentious upon revealing the dichotomies between both company and sharikah including the shareholding structure. Therefore, by adopting doctrinal legal and Shariah analysis, the article aims to examine the comparison of the concept of shareholding between the common law embedded in the Malaysian Companies Act 2016 and the Shariah. The article concludes that the current corporate shareholding under the common law contravenes the sharikah principles which are premised on the co-ownership of underlying business and the risk-reward principle. Hence, there is a need to revisit and modify the former in compatibility with the latter. Such modification is crucial for a Shariah-compliant business that emphasizes the shareholding based on sharikah principles in facilitating Shariah-compliant investments and activities within such entity.
A’thiyyah Ramadhan, A. A. (2007). Mawsua’h Al-Qawai’d Al-Fiqhiyyah Al-Munazdamah Li Al-Mua’malat Al-Maliyyah Al-Islamiyyah Wa Dawruha Fi Tawjih Al-Nudzm Al-Mua’sirah. Dar Al-Iman, Iskandairyah.
Abd Ghadas, Z. A., & Abd Aziz, H. (2019). Analysis on The Doctrine of Limited Liability under Company Law and Shariah. Al-Shajarah Journal of Islamic Thought and Civilization of IIUM, 24(293–310). https://doi.org/https://doi.org/10.31436/shajarah.v24i2.947
Abd Ghadas, Z. A., & Engku Ali, E. R. A. (2012). The Development of Partnership Based Structure In Comparison To the Concept of Musharakah (Sharikah) with Special Reference to Malaysia. Journal of Islam in Asia, 8(2), 293–315.
Abd Ghadas, Z. A., & Ibrahim, N. (2007). Right of Participation in Business as Matrimonial Property: The Malaysian Experience. IIUM Law Journal, 15(85).
Abdullah, L., Rosele, M. I., & Wan Ahmad, W. M. (2020). The Concept of Legal Entity from the Islamic Law Perspectives. Pertanika Journal of Social Sciences and Humanities, 28(4), 3207–3221. https://doi.org/10.47836/PJSSH.28.4.39
Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI). (2015). Shariah Standards for Islamic Financial Institutions. Dar Al-Maiman for Publishing and Distributing.
Al-Baqmi, S. Z. A.-M. (2019). Sharikat Al-Musahamah Fi Al-Nidzam Al-Saudi Dirasat Muqabalah Bi Al-Fiqh Al-Islami (1st edn). Obeikan.
Al-Hammadi, A. U. A. M. (2007). Al-Sharikah Dzat Al-Masuliyyah Al-Mahdudah Fi Al-Fiqh Al-Islami Wa Qanun Dawlah Al-Imarat Al-Arabiyyah Al-Muttahidah (1st edn). Dar Al-Muayyad.
Al-Haqil, A. M. (2019). Al-Masuliyyah Al-Mahdudah Fi Al-Sharikat Dirasah Ta’siliyyah Tatdbiqiyyah. Majallah Al-`Adl, 25.
Al-Hujailani, A. A. M. A. (2002). Tasarrufat Al-Amin Fi Al-`Uqud Al-Maliyyah (1st edn). Vol 1, Majallah Al-Hikmah, Great Britain.
Al-Za’tari, I. A.-D. (2012). Mawsua’h Fiqh Al-Mua’malat Al-Maliyyah Al-Muqoron. Dar Al-Usoma’.
Al-Zahrani, Y. A.-Q. M. (2013). Rights of Shareholders under Saudi Company Law 1965. Brunei University.
Al-Zarqa’, M. A. (2012). Al-Madkhal Al-Fiqh Al-`Am (3rd edn). Dar Al-Qalam.
Al-Zuhaili, W. (2001). Financial Transactions in Islamic Jurisprudence. Vol. 1, Dar Al-Fikr.
Al-Zuhaili, W. (2002). Al-Mua’malat Al-Maliyyah Al-Mua’sirah. Dar Al-Fikr.
Ali Hamid, K. M. A. (2013). Tahqiq Al-Khilaf fi Takyif Sahm Al-Sharikat Al-Musahamah wa Atharuhu Dirasat Ta’siliyyah Fiqhiyyah Tatbiqiyyah. Majallah Al-`Adl, 6.
Beuerle, C. G., & Schillig, M. A. (2019). Comparative Company Law. Oxford University Press.
Butaiban, M. `Abdullah. (2021). Ahkam Al-Khasarat wa Tatbiqatuha Al-Mu`asirah (1st edn). Dar Sulaiman Al-Maiman lii Al-Nashr wa Al-Tawzi’.
Cheang, L. S. (2018). Corporate Powers Accountability (3rd edn). LexisNexis Malaysia.
Ciepley, D. (2020). The Anglo-American Misconception of Stockholders As “Owners” and “Members”: Its Origins and Consequences. Journal of Institutional Economics, 16(5), 623–642. https://doi.org/10.1017/S1744137419000420
Collin, S.-O. (1996). Bad Losers: An Investigation of the Morality of the Limited Liability of Shareholders in a Joint Stock Company. Journal of Economic Issues, 30(1), 283–289.
Davies, P. (2010). Introduction to Company Law (2nd edn). Oxford University Press.
El-Gari, M. A. (2015). Al-Takyif Al-Fiqhi Li Ashum Sharikat Al-Musahamah. 6th Shura Fiqh Conference 2015. http://shura.com.kw/conferenceDesc.asp?pageID=21&confID=27
Fadel, M. (2019). Fiduciary Principles in Classical Islamic Law Systems. In E. J. Criddle, Paul B. Miller, & Robert H. Sitkoff (Eds.), The Oxford Handbook of Fiduciary Law, Oxford Handbooks (online edn). Oxford Academic. https://doi.org/https://doi.org/10.1093/oxfordhb/9780190634100.001.0001
Fahmi, H. K. (2003). Al-Sharikat Al-Hadithah wa Al-Sharikat Al-Qabidhah. In Majallat Majma’ Al-Fiqh Al-Islami Li Mu’tamar Majma’ Al-Fiqh Al-Islami (14th Sess.). Munadzamah Al-Mu’tamar Al-Islami.
Ghadas, Z. A. A., & Abd Aziz, H. (2018). Legal Framework of Corporation and Shirkah Al-Inan?: a Comparison. International Journal of Law and Interdisciplinary Legal Studies, 19–27.
Grantham, R. (1998). The Doctrinal Basis of the Rights of Company Shareholders. The Cambridge Law Journal, 57(3), 554–588.
Haidar, `Ali. (2003). Durar Al-Hukkam Sharh Majallah Al-Ahkam. Dar Al-`Alim Al-Kutub.
Hammad, N. (2015). Al-Takyif Al-Fiqhi Li Ashum Sharikat Al-Musahamah. 6th Shura Fiqh Conference 2015.
Hasanuzzaman, S. M. (1996). Rights and Powers of Partners in an Islamic “Shirkah.” Islamic Studies, 35(1), 5–23. http://www.jstor.org/stable/20836925
International Islamic Fiqh Academy. (2021). Resolutions and Recommendations of the International Islamic Fiqh Academy. International Islamic Fiqh Academy.
Ireland, P. (2016). Corporate Schizophrenia: The Corporation as a Separate Legal Person and an Object of Property. University of Bristol.
Lowry, J., & Reisberg, A. (2012). Pettet’s Company Law: Company Law & Corporate Finance (4th edn). Pearson Longman.
Manzdur Al-Haq, U. A.-R. (2009). Qa`idah Al-Kharaj bi Al-Dhaman wa Tatbiqatuha fi Al-Mu`amalat Al-Maliyah (1st Edn). Dar Ibn Al-Jawzi.
Martínez?Echevarría, A. (2017). The Nature of Shareholding and Regulating Shareholders’ Duties (No. 18-08; Nordic & European Company Law LSN Rsearch Paper Series).
Meng, C. W. (2017). Essential Company Law in Malaysia, Navigating The Companies Act 2016. Thomson Reuters.
Sulaiman, A. N. (2005). Shares in the Modern Corporation: A Comparison between Malaysian Companies Act 1965 and the Islamic Perspective. IIUM Law Journal, 13(1), 1–26.
Sulaiman, A. N., & Othman, E. (2018). Malaysia Company Law: Principles and Practices (2nd edn). Wolters Kluwer.
Mohiddin, M. N., Abdul Ghadas, Z. A., & Ramli, N. (2021). Developing Shariah Compliant Corporation: An Appraisal on The Rights and Liabilities of Members under The Malaysia Law and Shariah. Journal of Nusantara Studies, 6(1), 59–72. https://doi.org/http://dx.doi.org/10.24200/jonus.vol6iss1pp59-72
Muhammad Nur, `Ali. (2019). Al-Takyif Al-Fiqhi Li Sharikah Al-Musahamah wa Ashumiha. 8th Shura Fiqh Conference 2019.
Nyazee, I. A. K. (2006). Islamic law of Business Organization: Partnerships. The Other Press.
Nyazee, I. A. K. (2010). Islamic law of Business Organization: Corporations. Adam Publishers & Distributors.
Quinn, J. (2016). The Corporate Objective: Reinterpreting Directors’ Duties. Dublin City University.
Ramli, N., Abd Ghadas, Z. A., & Abd Aziz, H. (2023a). Corporate Ownership and Governance Structure of Corporation in Supporting Sustainability: The Shariah Perspective. International Journal of Academic Research in Business and Social Sciences, 13(13), 1–11. https://doi.org/http://dx.doi.org/10.6007/IJARBSS/v13-i13/17932
Ramli, N., Abd Ghadas, Z. A., & Abd Aziz, H. (2023b). Sustainability of Businesses via Shariah-Compliant Framework: Analysis of Shariah Principles on Corporation. IIUM Law Journal, 31(2), 287–314. https://doi.org/https://doi.org/10.31436/iiumlj.v31i2.820
Ramli, N., Abd Ghadas, Z. A., & Abd Aziz, H. (2023c). The Obligation of Corporate Group to Pay Business Zakat in Malaysia: A Legal and Shariah Analysis. In A. Hamdan, A. Harraf, A. Buallay, P. Arora, & H. Alsabatin (Eds.), From Industry 4.0 to Industry 5.0 Studies in Systems, Decision and Control (Vol. 470, pp. 485–496). Springer.
Ramli, N., & Ghadas, Z. A. A. (2019). An Appraisal on the Obligation of Companies To Pay Zakat: the Malaysian Law and Shariah Perspectives. International Journal of Law, Government and Communication, 4(15), 8–17. https://doi.org/10.35631/ijlgc.415002
Robe, J.-P. (2011). The Legal Structure of the Firm. Accounting, Economics, and Law, 1(1(5)). https://doi.org/10.2202/2152-2820.1001
Rosele, M. I. (2016). Isu Pembayaran Zakat Institusi Kewangan Islam di Malaysia. PhD Thesis, University of Malaya.
Securities Commission Malaysia. (2022). Resolutions of the Shariah Advisory Council of the Securities Commission Malaysia, 31 December 2022. https://www.sc.com.my/development/icm/shariah/resolutions-of-the-shariah-advisory-council-of-the-sc
Sheehy, B. (2006). Shareholders, Unicorn and Stilts: An Analysis of Shareholder Property Rights. Journal of Corporate Law Studies, 6(1), 165–212.
Sheehy, B. (2022). Sustainability, Justice and Corporate Law: Redistributing Corporate Rights and Duties to Meet the Challenge of Sustainability. European Business Organization Law Review, 23, 273–312. https://doi.org/https://dx.doi.org/10.2139/ssrn.3829319
Strine, L. E. J., & Macey, J. (2018). Citizens United as Bad Corporate Law. Faculty Scholarship at Penn Law, 2007.
Ta’wil, M. (2009). Al-Sharikat wa Ahkamuha fi Al-Fiqh Al-Islami (1st edn). Dar Ibn Hazm.
Ramli, N., Ghadas, Z. A. A., & Aziz, H. A. (2024). Examining the Concept of Shareholding in Company from Malaysian Company Law and Shariah Perspectives. International Journal of Academic Research in Business and Social Sciences, 14(11), 2963–2975.
Copyright: © 2024 The Author(s)
Published by Knowledge Words Publications (www.kwpublications.com)
This article is published under the Creative Commons Attribution (CC BY 4.0) license. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this license may be seen at: http://creativecommons.org/licences/by/4.0/legalcode
