Partnership Company and the Distribution of Profits and Losses In Islamic Jurisprudence and Afghan Law

Abstract

Islamic Sharia comprehensively addresses all aspects of life, including economic matters such as companies, where it clarifies their rulings and classifications due to their significant role in societal economic realities. Among these entities, the partnership company (Sharikah al-Tadhamun) is defined as a company formed by two or more partners who are jointly and personally liable with all their assets for the company’s obligations. While the partnership company shares certain characteristics with Inan and Mudaraba companies, it is most closely related to the Mufawada (negotiation) company because its defining feature is the personal and joint liability of partners for debts. Consequently, the fundamental rules of the partnership company fall under the framework of Mufawada. This research finds that Afghan law aligns with Islamic jurisprudence—particularly the Hanafi and Hanbali schools—in permitting variation in profit distribution among partners. However, it diverges from the Maliki, Shafi‘i, and Zahiri schools, which prohibit such variation and require profit shares to correspond strictly to capital contributions. Regarding loss distribution, Afghan law concurs with juristic opinions in the absence of specific agreements, distributing losses proportionally to capital shares. Nevertheless, when contracts specify variable loss distribution, Afghan law allows this based on mutual consent, mirroring the approach to profits, a stance that conflicts with all Islamic schools and Sharia principles. This study aims to clarify the jurisprudential rulings on profit and loss distribution in partnership companies and to evaluate the conformity of Afghan law with Islamic Sharia. The research employs an inductive approach through a review of Fiqh and legal sources, an analytical method to examine relevant jurisprudential and legal texts, and a comparative method to identify similarities and differences between Fiqh rulings.