Subject : How to Liquidate a Business
Fatwa Number : 3278
Date : 20-02-2017
Classified : Partnership in Business
Fatwa Type : Search Fatawaa

Question :

A father and his two sons have become partners in a certain business. However, after a while, the father and one of them withdrew their money causing that business to close down. Is it permissible for their partner to demand settling the mutual accounts of that business?

The Answer :

All perfect praise be to Allah, The Lord of The Worlds, and may His blessings and peace be upon our Prophet Mohammad and upon all his family and companions.

It is incumbent on partners to settle their mutual accounts with justice and a straight balance. Allah, The Almighty, said: "God doth command you to render back your Trusts to those to whom they are due;"{An-Nisa`/58}. In addition, Prophet Mohammad(PBUH) said: "Delay in payment by a rich man is injustice"{Agreed upon}.

If settlement was deferred, then there are three cases:

First: The business and its assets are present. In this case, settlement is based on the available shares.

Second: The business is liquidated but settlement of mutual accounts is deferred due to the absence of one of the partners. In this case, the share of the absent partner is the same as that he was entitled to at the time of liquidation, and it remains a debt on the other partners.

Third: Settlement is made between some partners with the intention to eat up the rights of the other partners. In this case, this is prohibited and considered eating up people`s property unjustly. Allah, The Almighty, said in this regard: " O ye who believe! Eat not up your property among yourselves in vanities:"{An-Nisa`/29}.

Finally, in case of dispute, we advise partners to resort to arbitration or court as an action for liquidation. And Allah knows best.



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