Firstly, this topic covers the limited liability principle in the book of Mufti Taqi Usmani. He describe the principle of the limited liability in modern economics and as a legal terminology which covers that it is a conditional securement of partner or shareholder who does not want to bear loss more than he accepted. The person interested may lose his original investment in his loss but not his entire asset because those are not linked to that enterprise or business organization. So this was considered as an absolute principle that a company could not exist without the limited liability. Then this topic covers the Mufti Taqi arguments of Islam in favor of the limited liability and company.
So this debate start with the juridical person existence and its duties. As it discussed that a juridical person in the western sense is the artificial person created by law which has its own obligations and duties. Which could meet to an end. Mufti Taqi relates this “juridical person” to the Islamic law and its existence in the Islamic law and rules.
Mufti Taqi relate the Waqf as a juridical person and argue that as a waqf a property could hold the property without making it part of the waqf property and the waqf could sell and make profit from it.It is also established principle that a donation to Masjid does not become waqf but it became the property of the mosque.So it shows that the waqf is a juridical person created by law. Which could hold property like a natural person,So Mufti taqi make the point that juridical person does exist in the Islamic law.
Same in the case of Bait ul Maal which holds the joint money of all the state.No one is the owner of the Bait ul Mal. Bait ul Maal could advance loan and have debt. Such as if ruler need to pay the salaries he could take money from the sadaqah department and deliver to Kharaj department.So it shows that the bait ul maal does also have the capacity of juridical person.
Mufti Taqi also relate the joint stock with the juridical personality and define the Khultah al Shuyur principle which define that the joint stock couldn’t be separated in order to levied the zakah.Mufti Taqi relate it to make it a separate entity but he does not provide any more concrete argument in this point.This same argument flaw could be find in the Inheritance under Debt concept ,which was define as legal entity because there is debt on the property and nobody is the owner of this property and the heirs of the deceased are only managing the property.This argument aslo doesn’t make sense that a deceased property without an owner turned into a juridical and legal entity.
Limited liability of a master of a slave, this point whereas is an interesting one which come up with the concept of the Al abdul Mazoon,which is the kind of a slave who are free to slave on the behalf of their master.But masters enjoy limited liability due to their slaves.Slaves are free to trade with the capital of their master but all benefit lies in the master but in case of the default and loss the slave has to pay all the money from the investement,capital and his trade.If the loss is more than that than the master could sell his slave to completer the loss even if them the loss is not completed the master is not liable more than that and loss does not spread to the asset of the masters. This limited liability is more close to the characteristic of the juridical personality.This limited liability concept is a Islamic concept and practice even though that slavery system does not practice anymore but still this shows the core of Islamic finance system.
So,as we see that Mufti Taqi is trying his best to use the analogy from the Islamic history and concepts to make room for the Juridical person in the Islamic legal system.Mufti Taqi made his argument by that Juridical person does exist in islimic law and then that limited liabitiy also the part of a juridical peson and both of the intervene with each other and not exist without each other.
Whereas, Mujlis ulama by South Africa criticize the mufti Taqi concepts and called them absurd and illogical. They refute the arguments of the Mufti Taqi in the favor of Juridical personality in Islamic law, Mujlis Ulama also raise another very important point which states that In Islam there is no Absolution from debt in the Islamic law. Even a person dies he has to pay his remaining debt in Akhirhah.So this argument refute any legal implications of limited liability in the Islamic law. As there is no concept of limited liabitiy of debt because if a living person is not exempted from the debt than how could a juridical person can enjoy the limited liability. Mujlis also criticize the Mufti Taqi argument that where a limited liability is there is a juridical personality or vice versa. They said that there is Shari evidence that both of them intervene with each other and couldn’t exist without each other such as they considered Waqf only as a property and a property itself cannot hold any other property as a juridical person. Owner of the waqf property is the Allah alone and Allah is not the fictitious personality but a real entity according to Islamic Law so the example of the Waqf as juristic personality does not make any sense.
They criticized the argument of Bait ul maal presented by Taqi Sab, they criticize that Biat ul Maal does not have any juristic personality and because in a such fictitious personality there is no concept of debt in between the company itself. They also made the point that in the example of kharaj and sadqah department who would be the person who sue the other department and there is no such obligation to pay that debt and therefore these are not the characteristic of the juristic personality.
They also criticed the exception given by the Mufti Taqi that Public limited companies are more concerned with the jurisdic personality as compare to the private and also the sleeping partners of the company who does interfere in daily work of the company.Mujlis ulama criticize that there is no distinction between both of them.both are not allowed in Islamic law and both have the same because both of the mebers of the company enjoy same limited liability and try to get the absolution of debt which is an obligation which they havce to pay even in the Akhirah so they are just not completing their huqooq.
They also refute the argument of the mukkil and wakeel argument, which says that if an adult could be the agent of the an insane or minor in law that a board of directors could also be the wakeel of a juristic peorsonality.But Mujlis ulama does not accept it and argue that in case of the juristic personality there is no natural person who is behind as muakkil.
They also refute the argument of inheritance under debt property and the master of aslave limited liability. They consider this master and slave limited liability as a contractual absolution of debt and slave as a natural person who bears all the loss of the trade. This does not make room for the existence of limited liabity and even though it does, it does not automatically became the juristic personality an existence =.this existence is just in particular scenario which does made liable a natural person who is going to pay the debt till his last breath and even in Akhirah.
These both article made a concrete view that In first Mufti Taqi was in favour of jurisdic personality and made the point that there is existence of jurisdic personality in Islamic law whereas the Mujlis Ulama totally against the point that there is no jurisdic personality,limitied liability and absolution of debt in Islamic law. They both are partially correct in my view but both of these extremist views does not lead us anywhere whereas the Imran Ahsan Nyazee took a more prudential approach and argue that there is need to develop the jurisdic personality in Islamic law through Ijtihad even though there is no such principle in Islam. Because for the betterment of society and financial system of Islam is lacking behind due to this. He said that we could adopt this western legal concept through IJtihad because of its necsstiy in the modern world.
He also argues about the capacity of non human personsonality,Is he eligible or not.Basically Imran Ahsan Nyazee does not hold a concrete view and stick with it whereas he give different arguments in both for and against corporate perosanlity.He talk about the Rahim book where he said that coporate personality does inclined according to the modern jurists.
Nyazee also describe the distinction of zimmah and personality.both are ususaly considered as one but there are a little distinction between both of them such as dhimmah consist of more religious as well as social obligation whereas personality is considerd more with the social obligation created by law and Dhimmah is created by the Allah which is not contractual or by legal implications.
The Nyazee whereas propose to create Islamic fictitious legal personality with following recommendations :
He proposed that the ruler may assign the fictitious personality which has limited Dhimmah to a non human,which would have no religious obligations from it.it will not subject to khitab or ibadat,no liability to zakat or sadaqah.it does have only the obligation of non religious duties and rights. There must be some form of aql associated with the personality which will lead the corporation.like in the form of board of directors.this Aql would bbear the liability.
It must be guaranteed with dual dual title of ownership which is holded by the members of the corporation who if permitted have the right of disposal of the corporation.
I actually agree with the Ahsan Nyazee arguments that even though there is no concept of limited liability in Islamic law but we should make it through Ijtihad and lay the basis for this concept
We do need to develop it we could bring necessity changes in the concepts by seeking from the Islamic law but there is nothing wrong in adopting the kuffar law and their concepts if there is nothing to injunctions of the Quran and Sunnah and if there is you could alter it and used it according to the modern need of the society.