Partners agreeing to buy off the share of the other in the event of death

Q: Two shareholders in a company came to an agreement to buy each other’s share in the company at the death of either one of the shareholders at an agreed price. This is to ensure the future of the company and also to guarantee a purchase price and a buyer for the shares. Funding of the purchase is by means of life assurance by the shareholders on each other’s lives. Both shareholders are Muslim and their wills are Shariah compliant. Is the buy and sell agreement between the two shareholders acceptable within the Shariah principles?


A: The sale price of the share of the deceased partner can only be confirmed after death. And this confirmation can only be with the consent of the surviving heirs. Whether they wish to sell or not is their prerogative.

And Allah Ta'ala (الله تعالى) knows best.


Answered by:

Mufti Ebrahim Salejee (Isipingo Beach)