DEVELOPING SHARIAH COMPLIANT CORPORATION: AN APPRAISAL ON THE RIGHTS AND LIABILITIES OF MEMBERS UNDER THE MALAYSIA LAW AND SHARIAH

Abstract

Shareholders are members of a company through share capital ownership. They proclaim themselves as “owners” although they have no direct involvement in business management which is wholly vested in the board of directors. In Malaysia, shareholders merely receive bundles of right in the company as prescribed under the Companies Act 2016. Due to the separate legal existence of a company, they are not liable for the company’s debts and liabilities. Contrarily, under Shariah, musharakah is a partnership agreement between individual partners for participation in capital and profits. It essentially regards them as the joint owners of musharakah, treating their existence inseparable from this business entity. The partners collectively share mutual rights and duties in the musharakah business according to their contractual agreement which makes them jointly liable for any liabilities incurred by the musharakah. This article discusses the rights and liabilities of members of a company under Malaysia Law and Shariah. It highlights the substantial distinctions between the shareholders’ rights and liabilities under the Companies Act 2016 and those of partners under musharakah. This article argues that an inculcation of Shariah principles of musharakah into the current legal structure of corporation is needed so that the Shariah-compliant status is always maintained.   Keywords: Company, Malaysia, members’ rights and liabilities, Musharakah, rights and liabilities in Musharakah, separate legal entity. Cite as: Haji Mohiddin, M. N., Abdul Ghadas, Z. A., & Ramli, N. (2021). Developing shariah compliant corporation: An appraisal on the rights and liabilities of members under the Malaysia law and shariah.  Journal of Nusantara Studies, 6(1), 59-72. http://dx.doi.org/10.24200/jonus.vol6iss1pp59-72