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Subject : Ruling on Partner Withdrawing from Share in Capital before Execution of Project

Fatwa Number : 3380

Date : 18-04-2018

Classified : Partnership in Business

Fatwa Type : Search Fatawaa

Question :

Two partners have agreed to execute a housing project. One of them pays a certain amount in cash and the other pays whatever is needed to finish the project. However, after purchasing the land upon which the houses were supposed to be built, one of them withdrew some amounts from his share in the capital of the company before the execution of the project. How should the profits be divided?

The Answer :

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

In principle, a partnership contract stipulates that the capital should be the property of both partners. Therefore, it isn`t valid that any of them dispenses of it without the consent of the other because the partnership contract rests on trust, and any action taken outside the circle of mutual consent is a betrayal of trust.

If a partner had withdrawn a portion of his share in the capital after having obtained the permission of the other partner, then that is permissible under the condition that he gives it back before the execution of the project. "A partnership contract isn`t considered valid if the capital wasn`t present; rather, it should be present upon the purchase contract{Commodities intended for trading} not the partnership contract since, in the latter, if the capital wasn`t present, it is permissible."{Hashyat Ibn Abdeen, 4/311}.

Nonetheless, if a partner withdraws a portion from the capital of the company without obtaining the permission of the other partner, then that amount should be deducted from his share in that capital and consequently the profit that he was supposed to get against that amount. For further details, please check the book {Kash-Shaf al-Qhinaa` Ala Matin Al-Eqna`, 3/519}.

In conclusion, it isn`t permissible for a partner to withdraw any sums from the capital of the company without the approval of the other partner, and if he did so, then he has to give it back as soon as possible. Otherwise, that sum will be deducted from his share in the capital and consequently the profit which he was supposed to receive against that sum. And Allah knows best.



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