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Islamic
jurists have defined the word 'company' ("Shirkah" in Arabic)
to mean "join together or intermix" and have interpreted it
as a legal concept "as a contract between partners in capital
and profits". A Shirkah is further elaborated to
mean "participation of two or more persons in a certain business
with defined amounts of capital according to a contract for
jointly carrying out a business and for sharing profits and
losses". This concept was recognised from the dawn
of Islam and jurists emphasised its importance as a useful
method of organising business relations. The corporate personality
of a company was implied, particularly in references made
to the settlement of the company accounts and the company's
profits and losses.
Under
the rules of Islamic Law (Sharia), companies are divided into
two main classes:
1.
Property Companies: this type of company involves the
ownership of property and is in turn usually classified
into:
1.1
Voluntary: this company is established when two or more
persons agree jointly to own property.
1.2.
Mandatory: this company is established by two or more
persons who find themselves in a situation where ownership
of property is forced upon them, for example, by inheritance
or through endowment.
2.
Contractual Companies : are established on the contract,
and are divided into two main categories:
2.1
'Mufawadha': which when translated literally means 'negotiation'
or 'delegation' , and is considered established when the
partners have equal shares in the company as well as equal
rights and benefits in profits and management.
2.2
'Aanan': literally translated as 'reins', where the
partners' shares are variable and not distributed equally
between the members.
In
addition to the general categorisation referred to above, contractual
companies are classified into three types:
1.
Capital Companies: are defined as a company where each
of the partners provides a specific share in the capital of
the company to conduct a trade together or separately and
share in the profits.
2.
Work Companies: established by two or more partners
providing efforts as capital for the conduct or performance
of a specific work or profession and share in the fees or
consideration for such efforts.
3.
Personal Companies: are defined as a company where two
or more partners join together to conduct trade based on
the trust and goodwill enjoyed by them in the business community.
Its establishment does not require the provision of a specific
capital. The object of this company is to achieve a profit
in the conduct of its business based on such goodwill.
Al
Majala had adopted precisely the aforementioned classification
of companies. The UAE Federal Courts had also, prior
to the application of the Company Law, recognised this classification
of companies.
For
further information on UAE Company Law and
Practice, it is recommended that the full text be referred to. Click on
the link to obtain a copy. For specific legal advise, please contact Gulf
Legal Services Ltd or other reputable Law Firm.
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