Management of the Musharakah
The normal principle of the Musharakah is that every partner has a right to take part in its management and to work for it. However the partners may agree upon a condition that the management shall be carried out by one of them and no other partner shall work for the Musharakah. But in this case the sleeping partner should be entitled to the profit only to the extent of his investment, and the ratio of the profit allocated to him should not exceed the ratio of his investment as discussed earlier.
However, if all the other parties agree to work for the joint venture, each of them shall be treated as the agent of the other in all the matters of the business and any work done by one of them in the normal course of business shall be deemed to be authorized by all the partners.
Termination of Musharakah
Musharakah is deemed to be terminated in anyone of the following events:
1. Every partner has a right to terminate the Musharakah at anytime after giving his partner a notice to this effect, whereby the Musharakah will come to an end.
In this case, if the assets of the Musharakah are in cash form, all of them will be distributed pro rata between the partners. But if the assets are not liquidated, the partners may agree either on the liquidation of the assets, or on their distribution or partition between the partners as they are. If there is a dispute between the partners in this matter i.e. that if partner seeks liquidation while the other wants the partition or distribution of the non-liquid assets themselves, the latter shall be preferred, because after the termination of Musharakah, all the assets are in joint ownership of the partners, and a co-owner has a right to seek partition or separation, and no one can compel him on liquidation. However, if the assets are such that they cannot be separated or partitioned, such as machinery, then they shall be sold and the sale proceeds shall be distributed.
If any one of the partners dies during the currency of Musharakah, the contract of Musharakah with him stands terminated. His heirs in this case, will have the option either to draw the share of the deceased from the business, or to continue with the contract of the Musharakah.
If any one of the partners becomes insane or otherwise becomes incapable of effecting commercial transactions, the Musharakah stands terminated.
Termination of Musharakah without closing the business
If one of the partners wants termination of the Musharakah, while the other partner or partners like to continue with the business, this purpose can be achieved by mutual agreement. The partners who want to run the business may purchase the share of the partner who wants to terminate his partnership, because the termination of the Musharakah with one partner does not imply its termination between the other partners.
However, in this case, the price of the share of the leaving partner must be determined by mutual consent, and if there is a dispute about the valuation of the share and the partners do not arrive at an agreed price, the leaving partner may compel other partners on the liquidation or the distribution of the assets themselves.
The question arises whether the partners can agree, while entering into the contract of the Musharakah, on a condition that the liquidation or separation of the business shall not be effected unless all the partners, or the majority of them wants to do so, and that a single partner who wants to come out of the partnership shall have to sell his share to the other partners and shall not force them on liquidation or separation.
Most of the traditional books of Islamic Fiqh seem to be silent on this question. However, it appears that there is no bar from the Shari’ah point of view if the partners agree to such a condition right at the beginning of the Musharakah. This is expressly permitted by some Hanbali jurists.
This condition may be justified, especially in the modern situations, on the ground that the nature of business, in most cases today, requires continuity for it’s success, and the liquidation or separation at the instance of a single partner only may cause irreparable damage to the other partners.
If a particular business has been started with huge amounts of money which has been invested in a long term project, and one of the partners seeks liquidation in the infancy of the project, it may be fatal to the interests of the partners, as well as to the economic growth of the society, to give him such an arbitrary power of liquidation or separation. Therefore such a condition seems to be justified, and it can be supported by the general principle laid down by the Holy Profit (PBUH) in his famous hadith:
“All the conditions agreed upon by the Muslims are upheld, except a condition which allows what is prohibited or prohibits what is lawful.”
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