Ruling on buying shares in a foreign company

1 – Definition of “shares” 

A share is a specific part of the total capital of a
company. 

A share is defined as being the share that the shareholder
has in a financial company, or the portion of the company’s capital that is
assigned to him as confirmed in a legal document that has a nominal value,
where the sum of all the shares represents the capital of the company and
each share is of equal value.  

Based on this, a share is an independent document that is
given to the shareholder and contains information that has to do with the
company, such as the company name, the amount of its capital, its
nationality, the location of its headquarters, the serial number of the
share, its value and the name of the shareholder, if he is to be mentioned
by name, or the comment that the share belongs to the bearer. 

2 – Ruling on shares: 

There is nothing basically wrong with buying and selling
shares, but there are a number of things to be avoided, as follows: 

(i)Buying and selling shares in
companies in which it is haraam to have shares, because they sell things
that are not halaal, or they help in spreading corruption and falsehood.

(ii)Buying and selling shares in
banks that deal in riba (usury or interest).

(iii)Depositing shares in riba-based
banks, because that will lead to the profits being mixed with riba.

The Standing Committee was asked about buying shares in
private companies that deal only in charitable work, agriculture, banks,
insurance companies and petroleum companies. They replied: 

It is permissible for a person to buy shares in these
companies so long as they do not deal with riba; if they deal with riba then
it is not permitted, because it is proven in the Qur’aan and Sunnah, and by
scholarly consensus, that dealing in riba is haraam. 

Similarly it is not permissible for a person to buy shares in
commercial insurance companies, because insurance policies involve ambiguity
and buying something unknown, and they involve riba, so they are forbidden
according to Islamic sharee’ah. 

Fataawa Islamiyyah, 2/43 

The following is the text of a question and answer from the
Fatwa Council of the Kuwaiti Finance House: 

Question: 

Is it permissible to buy and sell shares in foreign companies
such as General Motors, Phillips and Mercedes, knowing that these are
manufacturing companies, but they do not hesitate to lend and borrow money
with interest? 

Answer: 

The principle of buying shares in manufacturing, commercial
and agricultural companies is allowed according to sharee’ah, because they
are subject to either profit or loss, and this is akin to mudaarabah or
limited partnerships which the Lawgiver allows, subject to the condition
that this partnership avoid engaging in riba transactions, whether that
involves taking or paying interest. It may be understood from your question
that you are aware that these companies deal with riba, taking and paying
interest. On this basis, buying shares in them is to be regarded as buying
shares in a riba-based operation, which is forbidden in sharee’ah.  And
Allaah knows best.

Kitaab al-Fataawa al-Shar’iyyah
fi’l-Masaa’il al-Iqtisaadiyyaah, al-Ajzaa’ Bayt al-Tamweel al-Kuwaiti,
Fatwa No. 532.

 And Allaah knows best.