Buying and selling shares, and zakat on them

Question

(1) We have a share company here; the price of one of its shares is, for example, ten rupees. Zayd bought ten shares. The company gives no profit, but when they are sold, if the company has made a profit it gives the profit, and if it has made a loss it returns the principal together with the loss [deducted]. Is it permissible to enter into such a transaction or not? If it is permissible, then when the money is received, will zakat for the past period have to be paid or not?

Answer

(1) If a company carries on trade and for that purpose makes people partners at ten rupees each, and determines profit and loss strictly in proportion to the amount of money, then this arrangement is permissible, provided that the trade itself is lawful and not trade in wine and the like. Each person should pay zakat on his own capital every year.

Source: Fatawa Mahmudiyya

Preview. The full text opens with JavaScript enabled.