1.    It is permissible to buy the issued shares in a listed company, whose core trading activity is Halal,  but subject to the 5 percent rule relating to the purification of the impermissible income associated with a share, as set forth in paragraph 4 below.

2.    However, despite the core activity of the company being Halal,  the company may be engaged, as an incidental activity, in placing  its surplus funds, generated from it’s permissible core activities, in a call account or money market instrument, or otherwise the company may also be engaged incidentally in an impermissible activity ( such as , sale of alcohol), and thereby earn impermissible income.

3.    Does such impermissible income render the investment and /or trading in the shares of the company concerned Haram?

4.     The contemporary Shariah experts, on the grounds of genuine need, have permitted investing in such a company ( whose core activity is Halal) provided that the aggregate total impermissible income of a company derived from impermissible incidental activities, or impermissible assets, as disclosed in the relevant financials, or, where necessary reasonably estimated, must not exceed 5 percent of the total permissible revenue generated by that company, during the accounting period under review.

5.    The share itself must be purified of the impermissible income, on the basis that the proportionate share of the impermissible income , must be mandatorily removed and  disposed off to charity, irrespective of whether the company concerned has shown a profit or a loss during the accounting period under purification. For example, the impermissible income for the relevant accounting period is R 100 000,00 and there are 100  issued shares in the company. Each share must accordingly be purified to the extent of R 1000. If the investor or fund owns 10 shares in the company, then the sum of R 10 000 must be purified and compulsorily transferred to charity .على سبيل التخلص منه

6.    In this regard, the total investment in incidental impermissible activities, such as investment in interest-bearing securities and/or sale of alcohol, or another impermissible thing, should not exceed 30 percent of market capitalization, or, the total asset value of the company concerned.                

6.    The ownership of a share in the issued share capital of a company represents ( in substance) a proportionate undivided share in the underlying assets of the relevant company.                                         يمثل السهم حصة شائعة في موجودات الشركة  :                                                   
                      و شهادة السهم عبارة عن وثيقة للحق فى تلك الحصة: قرار مجمع الفقه الاسلامي الدولي

7.    It follows that,  if the core activity of the company is Haram( eg : manufacturing and distributing alcoholic beverages), then it is equally prohibited to buy and sell shares in such a company.( because the shareholder will be deemed to be owning and trading in such impermissible assets, not recognized as property in the Shariah). If a person wrongfully owns such shares, then he or she must sell them to a non - Muslim at a price proportionate to the Halal assets of the company concerned, such as buildings , vehicles etc, which are not directly connected to an impermissible activity. غير المتمحضة للعمليات المحرمة (see Mufti Taqi Usmani, Fiqhul - Buyoo , volume 2, page 1057 - 1058).
  لان محل العقد عند تداول الأسهم هو
هذه الحصة الشائعة.

8.    In the case of a Shariah-compliant unit trust fund ( registered under the Collective Investment Schemes Control Act, 2002 ), the impermissible income, not exceeding 5 % of total permissible revenue is properly deducted at source and mandatorily disposed off to charity.

9.    It is not permissible to buy preference shares ( which entitles the holder to priority in profits), and interest bearing debentures.
  لا يجوز إصدار اسهم ممتازة لها خصائص مالية  تودي إلى إعطاءها الأولوية عند التصفية أو عند توزيع الأرباح .    

10.    The shares of a company whose assets consist solely and exclusively of cash and receivables must be bought and sold at face value. In this context, the transaction constitutes an exchange of money for money, which must be equal on both sides.  Any sale at a premium or discount, falls within the definition of riba. However, investment in a company ( whose core activity is Halal) is permissible , if the tangible illiquid assets are not less than 30 % of the total market value of the assets , in which event the value of cash, receivables and cash equivalents are deemed to be subordinate

لكونها حينئذ تابعةلان اسهم تلك الشركة لا تمثل الا نقودا، فلا يجوز بيعها باقل أو اكثر من قيمتها الاسمية.

11.    All conventional forward and future transactions within a stock exchange is prohibited for several reasons, including the fact that there is no real transfer of the Shariah risk, through actual delivery; in many cases, the transaction constitutes a settlement based upon a difference in prices only. Similarly,  conventional derivatives, options ,  swaps, and short sales are impermissible.
   لانه من أنواع المجازفات والمقامرة  التي لا يراد فيها حقيقة البيع ، و تنتهى غالبا إما بالمقاصة بين اطرافها و إما بتسوية فروق الأسعار ، و هي نادرا ما تنتهي بالتسليم و التسلم فعلا.

12.    Although borrowing on interest is prohibited, the proceeds of the loan are nevertheless lawfully owned by the borrowing company, with the result that goods or assets purchased in exchange thereof are Halal. The total amount so borrowed should not exceed 30 percent of market capitalization or total asset value of the company concerned at the relevant time.

     اما عملية الاقتراض الربوي فحرام بلا شك، و يأثم بها فاعلها ، و لكن المبالغ المقترضة  تدخل فى ملك الشركة و ضمانها، فلا يحرم ما يكسبه بها.
 
13.    The above mentioned guidelines are consistent with the provisions of Shariah Standard 21 formulated by the panel of Shariah experts of AAOIFI, headed by Allamah  Mufti Taqi Usmani.حفظه الله

M S Omar
Revised: 24 November 2022
 قال شيخ الاسلام ابن تيمية رحمه الله : من اختلط بماله الحلال الحرام اخرج قدر الحرام و الباقى حلال له: مجموع الفتاوى: ج٢٩: ص ٢٧٣