Question
What is the ruling on buying and selling company shares in the stock market?
Answer
I say, and with God's success: It is common for many contemporary companies to consist of a group of shares sold in financial markets (the stock exchange). Our Sheikh Al-Othmani said in the jurisprudence of sales (1: 365 - 369): "The share is considered a common share in the company's assets; because custom considers shareholders as owners, and they are the ones entitled to the value of the assets upon liquidation. As for the fact that they do not have direct control over the company's assets, it is because each of them has a common ownership in all the assets, so one partner cannot act independently in a shared ownership. The partners agreed at the establishment of the company that the management of the assets is done according to the decisions of the total partners represented by the general assembly, the board of directors authorized by the general assembly. From this perspective, selling a share is selling a common share in the company's assets, and the rules of selling common property apply to it... Many scholars in India, such as Imam Sheikh Ashraf Ali Thanawi, have ruled that selling shares is permissible. However, this permissibility is subject to all the conditions of sale. If the company has not started its activity and its assets are limited to cash, then the shares of that company represent only cash. If a share is sold for cash in this case, it is not permissible to sell it for less or more than its nominal value; because differentiation leads to usury. Likewise, if the company's trade is forbidden, such as companies dealing in alcohol or pigs, or usurious banks, trading their shares is prohibited. However, if the company's commercial activity is permissible, but it deposits its surplus cash in usurious banks and may borrow usurious loans from them, then if he can stop such usurious actions by voting against them, he must do so, and he must rid himself of the forbidden earnings by donating an amount equivalent to his share of the revenue that entered the company through this deposit..." And God knows best.