Subject : Ruling when one Partner Handles a Financial Matter without the Permission of the other Partner
Fatwa Number : 3745
Date : 19-02-2023
Classified : Partnership in Business
Fatwa Type : Search Fatawaa

Question :

One partner has obtained a loan from a conventional bank based on a mortgage from his father. However, the company`s system stipulates that the signature authority with regards to financial matters can`t be conducted save with the approval of both partners. In addition, the bank has exempted the non-borrowing partner from the guarantee. In light of this, is the non-borrowing partner liable for that loan?

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.

The general rule is that a company`s contract is founded on agency. In other words, a partner is an agent acting on behalf of his other partner and vice versa. An-Nawai said: "Partners are agents acting on behalf of each other." {Rawdat At-Talibeen Wa Umdat Al-Muftin, Vol.4:283}.

Obtaining a loan on behalf of the company is amongst the matters that both partners must agree on and none is allowed to take such a decision alone. However, if one partner took a loan without the permission of the other then the former is liable for it while the latter isn`t. It is also permissible for the non-borrowing partner to claim any compensations from the partner who took the loan.

Article 17 of the Jordanian Corporate Law /1997 states: "A-Each partner has the right to participate in the management of the solidarity company. The company's contract defines the names of the partners authorized to run the company, sign financial matters as well as the limits of their authorities. The authorized person shall conduct the company`s business in accordance with the provisions of this Law and the regulations issued thereunder and within the limits of the powers delegated to him and the rights granted to him by the company's contract. He isn`t allowed to receive any remuneration or wages for running the company save with the consent of the other partners.

B-Every partner authorized to manage the solidarity company and sign on its behalf is deemed to be an agent of the company, which shall be bound by the business activities that he conducts on its behalf and the implications thereof. If the partner is not authorized to perform any business activity on behalf of the company, but he did, then the company shall commit itself to carry out the work for that party in good faith. However, it shall claim compensation from that partner for any losses or damages that could result from such activity."

In conclusion, if the company's founding contract stipulates that the financial matters are to be conducted by the joint signature of the partners, but one of the partners took a loan from any party in the name of the company without the permission of the other partner, the borrowing partner shall be liable for this loan. If the loan is repaid from the company's money, the non-borrowing partner shall hold the borrowing partner accountable for the amount that he endured from that loan. And Allah the Almighty knows best. 



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