SUSTAINABILITY OF BUSINESSES VIA SHARIAH-COMPLIANT FRAMEWORK: ANALYSIS OF SHARIAH PRINCIPLES ON CORPORATION

Abstract

Corporation under common law lies within the doctrine of corporate personality which entails that corporation is recognised as a separate legal person distinct from its constituents. As a new form of business vehicle that supports sustainability agenda and with the recent enormous and instant developments in the Shariah compliance businesses sector, the majority of contemporary Muslim scholars have discussed and recognised it through the concept of sharikah. Nonetheless, such recognition is contentious as sharikah is a contractual business entity inseparable from its partners. Furthermore, accepting this corporation under the sharikah without fully dissecting its legal attributes and the implications of running such a business entity not only contravenes both the legal principles of corporation and Islamic principles of sharikah, but also creates doubt as to the legitimacy of a Shariah-compliant business registered under this legal concept. This article analyses the legal concept of corporation under the common law and compares it with the concept of sharikah under Shariah. The discussion reveals that the recognition of corporation by the contemporary Muslim scholars under the sharikah concept is misleading and raised legal complications under the company law due to great differences in terms of nature, concept, and structures. This article adopts doctrinal and comparative analysis research methodology. The article concludes that corporation may be recognised under the Shariah subject with certain modifications to the former’s legal structures to be compatible with the Islamic principles of sharikah.