Abstract
The principle of separate legal entity – that is, after the incorporation of a company, it is regarded as an artificial person or juridical person who has the rights and responsibilities similar to a living person - has been widely accepted and applied in the world of business, trade and industry. In Malaysia, an Islamic banking institution is incorporated under the Companies Act 1965 where after its incorporation, it becomes a legal entity separated from its members and shareholders. In the case of Bank Islam Malaysia Berhad v. Adnan bin Omar (1994), the court held that Bank Islam Malaysia Berhad is a corporate institution created by statute. This case has been decided based on civil law system, not under the Islamic legal system. Since the products offered by an Islamic banking institution is solely in harmony with Islamic principles, one fundamental legal question yet to be resolved is whether the principle of separate legal entity is recognised under the Syariah law. This paper aims to discuss the issue of separate legal entity in Islam and its application to the Islamic banking institutions.
Highlights
One of the important elements in the common law concept of separate legal entity is that once a company has been incorporated, it will be considered as ‘a person’
It is important enough to be included in this journal as this article points to a fundamental legal problem of recognition of Islamic bank as a legal persona. It appears that the term ‘Islamic Bank’ that can be traced to the first Islamic bank founded in 1963 has had no historical precedent in Islamic laws, and remains yet to be formally recognized in Syariah laws some 45 years after this entity has been invented and nurtured over the years
The principle of separate legal entity as introduced under the common law system finds no express provisions from any Syariah law resources
Summary
This article is not on the operational aspects of banking as all our accepted articles have been over the last six years, but on the lacuna in law as to what is an Islamic bank. It is important enough to be included in this journal as this article points to a fundamental legal problem of recognition of Islamic bank as a legal persona. It appears that the term ‘Islamic Bank’ that can be traced to the first Islamic bank founded in 1963 has had no historical precedent in Islamic laws, and remains yet to be formally recognized in Syariah laws some 45 years after this entity has been invented and nurtured over the years. 140 Separate legal entity under Syariah law and its application on Islamic banking in Malaysia: A note: 139-154
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
