Bankruptcy, business dispute : defaulting invoices because of investors withdrawal

Fatawa Question

[Question One] : Dear Amo Monzer, In Sha Allah you are well and in the best of conditions-it has been a while since we have last talked. I have a very simple and brief query : I have been managing director of two startups in Dubai for the last year. Last week, investors have decided to not further invest in one of them. Accordingly, they have stopped sending funds. This means that some invoices will be defaulted on because investors are not willing to pay them. As far as my legal liability is concerned, I am of course seeing a local lawyer. However, from an Islamic perspective, where does that put me ? Am I "Islamically" responsible for these invoices, and am I personally accountable for paying them off ? or does the "Islamic" responsibility apply only to owners ? I would be most grateful if you could shortly share with me your opinion on this. Thanks a lot for your help, Jazakumu Allahu Khayr, [Question Two] : Dear Amo Monzer, Jazakumu Allahu Khair for your quick and helpful answer. The company we are talking about is indeed a LLC. The company is incorporated in the UAE however, where there are no real bankruptcy laws, and where from a pure civil law perspective managers could theoretically still be sued personally to pay off the company's debts-it is not clear how courts would rule in such scenarios. Does that change anything in your assessment ? Just for further information : at the time credit facilities were negotiated and used (e. g., bills for advertising were paid after 30 days), things looked bright and investors were sending money as per schedule. When it was clear investors would not be sending any more money, all contracts were immediately cancelled. There is one more thing : the company that is now being closed was an electronics retailer which offered customers 12 months warranty on all products sold. Now that the company is shutting down, what does that mean with respect to our promise to keep up the warranty ? (no more products were sold after it was clear we would shut down). Am I as manager personally liable to uphold the warranty from an Islamic perspective ? Would your answer be different to the above questions if I were also the owner of that business ? I am most grateful for your precious time and advice. It has always been of great help and guidance to me. Jazakumu Allahu Khayr and kind regards, Wassalam Alaykum Wa Rahmatu Allahi Wa Barakatuh,

Fatwa

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Publication Date

2012-09-02

Main Subjects

Religion
Law
Islamic Studies

Topics

• Islamic jurisprudence
• Investments
• Stockholders

No. of Pages

2

Data Type

Fatawa

Language

English

Record ID

BIM-733960

• APA
• MLA
• AMA