Summary of the Limited Liability Concept

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In Islam the essential requisites for transacting and contracting in bilateral dealings are Aql (sanity) and Buloogh (adulthood). The trade and commercial transactions of only sane adults are valid in Islam. The transactions of minors (under 15) and insane persons are not valid in the Shariah. Thus, if an insane person or a child sells any of his possessions, the sale will not be valid.

All huqooq (rights and obligations, responsibility and liability) of the transactions and contracts devolve squarely on the parties who transact or enter into a contract. The consequences of the transactions devolve fully and in entirety on the parties of the contract. Thus, a dead man or an animal or a stone or a child or an insane person cannot be made a party to a contract. Liability does not settle on these persons and on inanimate objects.

However, in the western capitalist system, there is an irrational, absurd and downright fictitious concept described ‘a legal person’ or a ‘legal entity’. For better comprehension we shall refer to this conceptual legal ‘person’/entity as a ‘legal’ donkey. This donkey has absolutely no real existence. It is a figment of the imagination of riba-drunk capitalists who have invented this fabrication for the sole purpose of attracting capital (money) from the masses at large.

In order to entice the masses to invest in a venture, there has to be a powerful incentive. That incentive is the hallucinated legal donkey which is a scrap of paper to which the capitalist system assigns rights, obligations and liability. In a partnership venture contracted with the legal donkey, the human partners (the investors/shareholders) are absolved of all liability. If the venture busts and goes bankrupt, the partners/shareholders who had derived the benefit which the legal donkey had offered, are not held liable for the debts. The creditors have to write off the debts as losses for the simple reason that the legal donkey in whom contractual capacity was invested by the capitalist order, is a figment of the imagination, hence no one can hold it liable or extract anything from the abstract donkey in the minds of the capitalists.

While Islam does not recognize the legal donkey forgery designed for absolution of the debts of the shareholders, there are some misguided ‘scholars’ – molvis and sheikhs and even secularists with a smattering of Islamic knowledge – who have been desperately struggling to give Islamic recognition to the fictitious donkey. They are at pains to introduce this capitalist concept into the Shariah. In so doing, they betray the superficiality of their knowledge and the corrupt motives for the effort to give Shar’i legality to the legal donkey fiction.

These miscreant ‘scholars’ who seek Qur’aan and Hadith basis for the capitalist donkey fiction, are like the donkey –real physical donkey which Allah Ta’ala mentions in the following aayat:

“The example of those upon whom the Tauraah was loaded, is like the donkey on which books have been loaded.” (Al- Jumuah, aayat 5)

In this aayat, the Qur’aan Majeed compares the scholars of the Yahood to a donkey. The Tauraah (the Shariah of Nabi Musaa – alayhis salaam) was entrusted to the Ulama of the Yahood. Instead of implementing its commands, they tampered with it, mutilated its Ahkaam, distorted its meanings, and subjected it to baseless and false interpretation to gratify their worldly motives. Just as a donkey carrying a load of books is bereft of understanding and does not appreciate the treasure of Knowledge loaded on its back, so too are these scholars like donkeys. They neither appreciate nor correctly understand the Divine Shariah, hence they abortively labour to introduce donkey concepts into the Fabric of Islam. In the process they resort to hallucination, imagination and false interpretation which evince mockery from even children who are on the verge of intelligent reasoning.

All molvis and sheikhs who have betrayed Islam and the Ummah by bartering away the Shariah from platforms such as the shariah boards of riba banks, and those who have destroyed Muslim inhibition to haraam by legalizing the meat products, even pork, of the kuffaar establishments, and those who seek to legitimize qimaar (gambling) ventures such as insurance, etc., are like the donkey on which books of knowledge are loaded. It is precisely for their donkey mentality that they panic when they are admonished and their wrongs are pointed out to them. They behave like wild donkeys when naseehat is offered. Describing such donkeys carrying books of knowledge, the Qur’aan Majeed states:

“What is the matter with them – (what makes) them turn away in aversion from naseehat (admonition) as if they are wild donkeys fleeing from a lion?”

 Yes, this is their reaction when the Haqq stares them in the face. When the Haqq is flung at those who believe in the legal donkey fiction, then they display donkey mentality, and flee like wild donkeys from the lion (from the Haqq). Indeed they all are donkeys!


In the authentic Ahaadith of Rasulullah (sallallahu alayhi wasallam) it is clearly stated that unpaid debt will be compensated with the Fardh Salaat and other virtuous deeds of the debtor.

A’mal-e-Saalihah will be the currency in the Aakhirah with which the debtor will be compelled to pay his debts. In a Hadith, narrated to us by Hadhrat Muhammad Masihullah (rahmatullah alayh), it is said that for every farthing (less than one cent) of unpaid debt, 700 Maqbool (accepted) Salaat of the debtor will be given in payment to the creditor.

However if the debtor was honest and made his best effort to pay, but before settling his debt, Maut claimed him, then Allah Ta’ala, out of His boundless Rahmat will “pay” the debt on behalf of the honest debtor. From this it is clear that there is no automatic absolution of debt which is the effect of the kuffaar concept of limited liability.

Absolution of debt is obtained in this world either by payment or by the creditor absolving the debtor. And, in the Aakhirah, absolution will be obtained by either paying with the currency of the Aakhirah or by Allah Ta’ala “paying” on behalf of the honest debtors. There is no other way.


“Hadhrat Anas (radhiyallahu) narrates that Rasulullah (sallallahu alayhi wasallam) said: ‘He who recites Qulhuwallaahu Ahad (i.e. Surah Ikhlaas) 200 times every day, fifty years of sins will be wiped off from him, except the DEBT on him.” (Al-Jaamius Sagheer)

In response to a Sahaabi who asked about forgiveness for the sins of a Shaheed (Martyr), Rasulullah (sallallahu alayhi wasallam) said: “Yes, (i.e. His sins are forgiven) if you are firm, sincere and facing (the enemy in the battlefield) not turning your back (in flight), except debt. Verily, Jibraeel said this to me!! (Tirmizi)


Rasulullah (sallallahu alayhi wasallam) said: “Verily, you have been created for the Aakhirah.”

We have been sent into this world for a short time to gain spiritual elevation and perfection to the best of our ability. We have not been sent to cultivate material perfection at the expense of sacrificing or harming our Aakhirah. In every sphere of our life, the dimension of the Aakhirah has to compulsorily feature. No aspect of the Muslim’s life should be conducted in isolation of the Aakhirah. Even the economic system which we adopt should necessarily be impregnated with the influences and values of the Aakhirah.

It is a grievous error which Muslims in these day commit when they give the Aakhirah a back seat and make endeavours to bend and subject the Shariah to alien cultures and systems. One such destructive system is the capitalist economic system. Attempts are being made in different quarters to make the Shariah compliant to this kuffaar system by resorting to far-fetched and incongruous interpretation. Totally untenable and invalid analogies are presented in the attempt to accord Shar’i acceptability to alien concepts which Islam repels.

One such concept is the utterly fallacious idea of the fictitious ‘juridical person’ with its baatil effects of ‘limited liability’ and automatic absolution of debt. But absolution of debt is in fact the denial of the huqooq (the rights) of the creditors. This concept is in diametric conflict with the abundant Nusoos— explicit Ahadith— of Rasulullah (sallallahu alayhi wasallam) which state with great clarity and emphasis that even the Shaheed (Martyr) will not be absolved of his debt. Payment will be demanded in the Aakhirah. There is nothing allegorical or metaphorical about these Nusoos.

In view of the clarity of the Nusoos and the position of the Shariah, viz., its juridical verdicts, the attempt to eke out Shar’i basis for the kuffaar concept is indeed most surprising. We can only attribute this attempt to an attitude of liberalism which is acquired when free association takes place between Ulama and Muslim capitalists who are ignorant of the Shariah; who have adopted western ways; whose trade and commerce are entirely capitalistic orientated, and whose life-styles are is at variance with the Sunnah.

The importance of discharging huqooq, especially debt, cannot be overemphasised in view of the abundance of Ahadith which speak with great clarity on the issue of paying debt. The fact that the demand for payment by creditors is held valid in the Aakhirah by the Shariah, should be more than ample evidence for a Muslim that there is absolutely no scope in the Shariah for automatic absolution of debt which according to the capitalist economic system is the imperative effect of the limited liability principle which in turn has been spawned by the fictitious man dubbed ‘the juridical person’.

If the process of Qiyaas (Analogical Deduction) culminates in a conclusion which militates against the Nusoos of the Shariah, then such qiyaas will be set aside as baseless regardless of any rational or logical basis it may have. Our criterion is the Ahkaam (Laws) of the Shariah and their underlying Nusoos. Anything in conflict should necessarily be struck down. The limited liability idea besides being in diametric contradiction with the Ahaadith of Rasulullah (sallallahu alayhi wasallam), does not conform to even the Shar’i procedure of Qiyaas. There is absolutely no primary premise (Maqees alayh) for gaining a Shar’i hukm of validity and permissibility for this alien concept.

An attempt was made, albeit abortive, to show that certain Shar’i masaail (laws) conform to the limited liability idea. However, we claim with great emphasis that there is not even a superficial basis for this concept in the examples presented as Shar’i grounds for the un-Islamic concept.

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