Bankruptcy, business dispute : [liquidating an investment company]

Fatawa Question

As-Salam Alaykum Wa Rahmatullah Wa Barakatuh Respected Sheikh In Sha Allah this email reaches you in the best of health and Emaan. And then we, brothers at Que One Group would like to greet you for the holy month of Ramadan. May the blessing of Allah SWT shower all of us. As you know we have already setup an Investment company in BVI, UK and current situation in this Company is as follows. 1. All Assets are in form of Lands. 2. Total assets of this company are around AED 31,000,000 /-(Purchase Cost) and there are 86 investors. 3. Expected accumulated losses on total assets are 52 % but these losses are varying from Land to land. Some of the Lands lost only 30 % and some 70 %. 4. 35 out of 86 Investors owning the assets of more than AED 16,000,000 /- want to sale their share and Invest this money with us in other projects and there In Sha Allah we will recover losses. Investors are aware of expected losses and ready to bear the same. 5. Total no. of lands we have 24. 6. Market situation is that if we go to sell these assets we will lose 52 % of assets value so we think that not all of our Investor will ready to do so. 7. Our contract does not say that if there is loss in any transaction we need to take permission from Investors. So you are kindly requested to please advise us on the followings… 1. Can we liquidate this company partially I. e. only for those 35 Investors at NAV which is 52 % down. If you decide to liquidate the company completely and dissolve it you can force that on the investors who refuse by virtue of the contract that you have with them. If you take this route I suggest that you make an introductory letter and give some two week notice during which you seek suggestions and input from them in case some investor may come with better solutions. However, if you want to keep the company and liquidate only partially, you may not need to sell all lots of land. In this case why not consider giving the remaining investors, the 51, a choice to keep their lands and sell only as much as you need for the share of 16 / 31 that belongs to the desiring 35 investors. Actual sale will also give you better estimate of the loss as you can also appraise non-sold lots according to prices you get for sale. 2. If we come at a situation where 95 % of our Investors wants to liquidate their share and invest this money with us in other Projects but remaining 5 % say no to sale their share at losses and want to wait until market recover fully (which may take years) . So how will we deal with them ? Can we just ask them take or liquidate their Assets & leave us. If there is no additional costs in keeping the company alive for this 5 % give them the same choice. I should say even if there is additional costs still you can give them the choice provided they bear this extra cost. If keeping the company alive is a burden that you do not like you can give a choice of either take lots for their 5 % or sell and give them money 3. What can be alternate scenario / best scenario to liquidate the whole company ? Best scenario is for all of them to agree on sale and re-invest with you in other projects. But if some do not agree you may give them a choice of taking actual lots if this is physically and legally possible. The alternative is that you can always exercise your discretionary power as company management to the best of your judgment and force full liquidation. Our investors also want to know about the Zakah on their Investment 1. This Investment already lost 52 % of their value. 2. This investment is in form of Lands & there is no Cash. 3. Some of our Investors do not have money to pay Zakah on these Investment. Because most of their money they invested with us. 4. Que One Group cannot give them loan or any other assistance to pay their obligation. Please advise us on the followings… 1. When they need to pay Zakah. 2. At what value they have to pay Zakah. 3. Do they need to pay Zakah for whole period they own their share in Lands ? 4. Do they need to pay Zakah now or it can be delayed since some of them do not have money to pay. The only way they can pay Zakah is they withdraw from Investment. Zakah is undoubtedly due on them because this is investment property intended for sale. Zakah should be calculated for every year on due date and one who does not have other sources of cash to pay due amount of Zakah or does not want to pay it from other sources has the choice to delay the payment of due amount until liquidation of the same item without sin. The reason is that basically Zakah is payable from same Zakatable item and one is not required to pay it from other sources. But in this case upon liquidation Zakah due for all past years must be paid all together even though there may be losses when sold. We wait for your valuable reply. With thanks and regards, Suhail

Fatwa

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Publication Date

2009-08-26

Main Subjects

Religion
Law
Islamic Studies

Topics

• Islamic jurisprudence
• Contracts
• Investments
• Corporations
• Mutual funds
• Liquidation

No. of Pages

3

Data Type

Fatawa

Language

English

Record ID

BIM-733947

• APA
• MLA
• AMA