FAQ / Silent Partnership

Silent Partnership

Silent Partnership

A Silent Partnership Contract

A silent partnership contract should be confined to investing the capital in trade, i.e. buying and selling only. In this
transaction, it is necessary that the share of both silent and working partners is specified as a certain percent of the
profit.
Yet, there is no problem, if the working partner gives the silent one monthly a certain amount as his share of the
profits on account and at the end of contract they make muṣālaḥah as to the profit. Nor is there any problem in
stipulating that in case of decrease in capital the working partner bears the loss.

A Silent Partnership on Banknotes

There is no objection to a silent partnership being conducted in banknotes that are used nowadays. It is not
permissible, though, to be conducted in merchandise.

Silent Partnership in Production and Services

A silent partnership contract should be confined to investing the capital in trade, i.e. buying and selling only. Using it
in the domains of production, distribution, services, and the like is not permissible. However, there is no objection to
resorting to other shar‘ī contracts such as ju‘ālah and ṣulḥ for these purposes.

Silent Partnership Espoused by a Bank

The silent partnership espoused by a bank, as the agent of the depositors, is ruled sound and the profits made
thereof, that go to the money owners, are ḥalāl unless it is proved that the transaction is nominal and invalid for a
reason.

An Invalid Silent Partnership

In an invalid silent partnership, the whole profit belongs to the silent partner after he authorizes the transactions and
the working one is entitled to nothing — even to the normal compensation for the work — unless he is not aware
that the contract is invalid in which case he may get the normal compensation for the work.

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