To invest in the share

In the name of Allah, Most Compassionate, Most Merciful,

To invest in the share of a particular company or to purchase shares a
company's from the stock market has been a matter of debate between
the contemporary scholars.

Some contemporary scholars (who are very few) are of the opinion that
it is not permissible to invest in shares. There basic argument is
that, shares do not represent an ownership for the share-holder in the
company's assets, rather the share certificate is a document that
signifies lending of some amount of cash to a particular company. The
dividend which one receives will be considered interest (riba), thus
unlawful.

The majority of the scholars, however, do not agree with this opinion.
Scholars such as, Shaykh Ali al-Khafif, Dr. Wahba al-Zuhaili, Shaykh
Taqi Usmani and others have declared investing in the shares of
companies lawful (halal) subject to certain conditions.

They say that the share certificate actually signifies an ownership in
a company for the share-holder. His ownership is in proportion of his
investment in the company. This is the reason why if the company was
to become bankrupt, the share-holder will not regain his investment in
the state of cash, rather he will receive the company's assets
according to his proportionate ownership.

Therefore, it will be permissible to invest in the shares of
companies, and the share certificate will not imply lending cash to
the company.

If one intends to purchase shares from the stock market, it will be
permissible with adherence to the following conditions:

1) The main business of the company must be lawful (halal). Therefore,
to purchase shares of a company whose main business is unlawful, such
as interest bearing banks, insurance companies, companies
manufacturing and selling liquor, etc... would not be permitted.

If the main business of the company is Halal, such as a textile
company or a telecommunication company, then it will be permissible to
subscribe to its shares.

2) Many companies, despite their main business being Halal may be
involved in interest dealings in one way or another. Due to this the
following is necessary:

a) One should object to the interest dealings, preferably in the
annual AGM. By doing so, the responsibility will be deemed fulfilled.

b) When the dividend is distributed, the proportion of the company's
income which was gained by interest dealings must be given in charity
without the intention of receiving reward, as is the case with
unlawful money in general. This amount (interest accumulation) may be
known by means of the income statement.

3) The company whose shares one intends to purchase must have some
illiquid assets in its possession. They must not all be in liquid form
(i.e. cash, cheques, bonds, etc…). If all of the company's assets are
in liquid form, then the share cannot be sold or purchased except at
face value.

The reason for this is that the share in this case represents money
only, and money cannot be traded in except at par.

If the above three/four conditions are complied, then it will be
permissible to trade in shares from the stock market.

As far as working as a stock broker is concerned, the work normally
consists of buying and selling shares on behalf of a client. In the
light of the above, it becomes clear that those shares in which it is
permissible to trade, his work will also be permissible, and vice
versa.

Therefore, it would be better not to work as a stock broker. However,
if one is able to save oneself being involved in unlawful trading then
it will be permissible.

And Allah knows best

Muhammad ibn Adam, UK