Subject : Ruling on Deducting a Percentage from the Profits of Shareholding Companies as a Reserve

Fatwa Number : 1911

Date : 05-10-2011

Classified : Current Financial Issues

Fatwa Type : Search Fatawaa

Question :

Under the applicable laws in Jordan, it is incumbent upon companies to deduct a percentage from their annual net profits before distribution of profits to shareholders and to keep this portion as a reserve for the company under what is called "Compulsory reserve."Accordingly, the internal rules of the company include this stipulation upon distribution of profits to shareholders. This reserve isn`t distributed to shareholders or company owners save upon liquidation of company. This matter also applies to cooperative societies in Jordan under the applicable cooperative law as well as the internal regulations of these societies themselves, and shareholders are well acquainted with this. Sometimes, shareholders withdraw from these companies and societies or sell their shares without benefitting from any portion of the reserve although it accumulated during the period in which they were holding shares. On the other hand, in case the company or the society was liquidated, shareholders are the ones who benefit from this reserve although some of them have been holding shares for only a year or two. Based on these facts, do shareholders who withdraw or sell their shares before the liquidation of the company or society have a right in this reserve although they have prior notice of the rules and have approved of them upon affiliating to these institutions?

The Answer :

All perfect praise be to Allah the Lord of the Worlds. May His peace and blessings be upon our Prophet Mohammad and upon all his family and companions.

 

It is permissible for partners to allocate a certain portion, which is placed in an independent fund, to cope with hazards. Thus, whoever holds shares in this company or cooperative society has already agreed to this, and it isn`t permissible for the shareholder who sells his share before liquidation of company to  claim a share in this reserve because he has approved of the law, which denies him the right to make such claim in case he sold his share. And Allah the Almighty Knows Best.

    

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