Question Summary:
If a business partner dies, do the conditions set by partners become invalid? Question Detail:
We own a business that had two set of Shareholders —Shareholder A-That consisted of one person and Shareholder B-That consisted of 5 people.
Prior to Shareholder A passing away-We had an agreement with regards to Perks. There were two different type of perks i.e. Business related and private expenditure
Perks were only available to those who were directly involved in the business Shareholder A passed away in February of 2015.
The business carried on as usual.
The perks were available to those who were in the business as usual (i.e. Shareholder B-from 3/15 to current 7/16).
Now a year or so later the heirs of Shareholder A are of the opinion that the initial agreement is no longer valid.
My questions are
Is the initial agreement valid?
Must a new agreement be drawn up with the heirs of Shareholder A?
The heirs of Shareholder A are not desirous of joining the business... Hence they will automatically rule against the Perks.
Example of Perks Enjoyed
Answer :
In the Name of Allah, the Most Gracious, the Most Merciful.
As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.
In order to provide adequate guidance regarding your questions per the laws of Sharī`ah, we require clarification of the following:
1. Based on your query, we have made the following assumptions:
The business was initiated with two sets of shareholders consisting of a total of six people. One of these six individuals held a share of 50% (i.e. Shareholder A), and the other five held a share of %10 each. Based on this, the profit share was set according to each person’s initial investment in the business, e.g., Shareholder A had a profit share of %50 and all others had 10%.
A mutual agreement was also made between the partners that each partner that was directly involved in the business will be allowed some “perks” or benefits from the business. Some of these perks include:
- A regular salary
- Personal and business expenses
- Medical Costs
Shareholder A passed away, and the heirs of Shareholder A wished for the business to continue; therefore, the business assets of Shareholder A were not withdrawn (via liquidation or otherwise) from the business and the heirs of Shareholder A gave their consent to continue with the business using Shareholder A’s assets.
The initial agreement regarding the “perks” continued for a few months without any disagreement form the heirs of Shareholder A. Now, the heirs of Shareholder A contend that such an agreement was invalid.
Are the assumptions made above correct? If not, please clarify.
2. Was the agreement for the perks made before or after the initial agreements were made for the business? In other words, were the perks defined in the original agreement or were they added later on during the course of the business?
3. Those who are not “directly involved in the business,” are they simply contributing capital without participating in any activities of the business?
4. After the death of Shareholder A, was there any agreement made with the heirs specifically regarding the business? What became of the estate of Shareholder A?
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And Allah Ta’āla Knows Best
Bilal Mohammad
Student Darul Iftaa
New Jersey, USA
Checked and Approved by,
Mufti Ebrahim Desai.
www.daruliftaa.net
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