Business buy and sell agreement
Question:-
We have a situation where a father of two daughters passed away some years back, and the estate has since been wound up and distributed.
As part of the distribution, the daughters received funds which had been invested back then.
The source of funds were from his business “buy and sell” agreement, which was linked to a life cover policy. Meaning that, his partner was the beneficiary of the life policy and had used this payout to purchase the Marhoom’s shares in the company.
This policy which was paid out to the partner, was paid to the Marhoom’s estate, and it was eventually distributed to the heirs.
The children have not touched the funds since receiving it and would like to understand the status of this money i.e. permissible to use it or not.
Answer:-
Firstly, when a person passes away, then all the assets of the deceased person belong to the heirs. It is totally up to the heirs to decide whether they want to keep their portion of the assets (for themselves) or they want to sell their assets. Now, if the ‘buy and sell agreement’ is some sort of an agreement whereby the surviving business partner purchases the deceased person’s shareholding in the business using the insurance pay-out without having to take the consent of the heirs, then such a sale is invalid. It is necessary for all the Baaligh heirs to willingly sell their respective portion of the business to the surviving partner for the sale to be valid. In conclusion, if a formal proposal and acceptance didn’t take place between the heirs and the surviving business partner, but the Marhoom’s share was purchased due to the ‘buy and sell agreement’ being in place, then the sale will be invalid.
Secondly, if we are to assume that the Baaligh heirs agreed to sell their portion of the business to the surviving business partner at a stipulated price, then the ruling will be as follows:
If the deceased contributed R200 000.00, for example, towards the life policy and the insurance pay-out was R2 million, then the R200 000.00 will be Halaal to utilize by the surviving partner and the R1.8 million will be Haraam. The R200 000.00 (Halaal funds) will be considered as a Wasiyyat on behalf of the surviving business partner which he may utilize, with the proviso that it does not exceed one third of the estate value.
Now, if the surviving business partner used any amount over and above the Marhoom’s total contribution (which in our example is R200 000.00) towards the purchase of the Marhoom’s share, then the excess amount will be Haraam for the daughters to utilize. The contribution amount used to purchase the business from the daughters will be permissible (for the daughters to utilize) but not the excess amount (over and above the total contribution). We hope this clarifies the issue.
جس پیسہ کے متعلق قطعی طور پر علم ہو کہ یہ حرام ہے اس کے عوض کوئی شیء فروخت کرنا اور وہ پیسہ حاصل کرنا درست نہیں ، جہاں علم نہ ہو وہاں کنجائش ہے (فتاوی محمودیہ ص۲۷۳ ج۱۱ / امداد الاحکام ۳۸۶ ج۴ / جواہر الفتاوی ص۲۹۴ ج۳)
ALLAH TA’ALA KNOWS BEST!
ANSWERED BY:
Mufti Mohammed Desai
Date: 25 Rabi-ul-Aakhir 1444 / 20 November 2022