Ruling on buying shares in a foreign company
Question

                What is the shar’i ruling on buying shares in a foreign company?
Praise be to Allah.
    1 – Definition of “shares” 

    A share is a specific part of the total capital of a 
    company. 

    A share is defined as being the share that the shareholder 
    has in a financial company, or the portion of the company’s capital that is 
    assigned to him as confirmed in a legal document that has a nominal value, 
    where the sum of all the shares represents the capital of the company and 
    each share is of equal value.  

    Based on this, a share is an independent document that is 
    given to the shareholder and contains information that has to do with the 
    company, such as the company name, the amount of its capital, its 
    nationality, the location of its headquarters, the serial number of the 
    share, its value and the name of the shareholder, if he is to be mentioned 
    by name, or the comment that the share belongs to the bearer. 

    2 – Ruling on shares: 

    There is nothing basically wrong with buying and selling 
    shares, but there are a number of things to be avoided, as follows: 

    (i)Buying and selling shares in 
    companies in which it is haraam to have shares, because they sell things 
    that are not halaal, or they help in spreading corruption and falsehood.

    (ii)Buying and selling shares in 
    banks that deal in riba (usury or interest).

    (iii)Depositing shares in riba-based 
    banks, because that will lead to the profits being mixed with riba.

    The Standing Committee was asked about buying shares in 
    private companies that deal only in charitable work, agriculture, banks, 
    insurance companies and petroleum companies. They replied: 

    It is permissible for a person to buy shares in these 
    companies so long as they do not deal with riba; if they deal with riba then 
    it is not permitted, because it is proven in the Qur’aan and Sunnah, and by 
    scholarly consensus, that dealing in riba is haraam. 

    Similarly it is not permissible for a person to buy shares in 
    commercial insurance companies, because insurance policies involve ambiguity 
    and buying something unknown, and they involve riba, so they are forbidden 
    according to Islamic sharee’ah. 

    Fataawa Islamiyyah, 2/43 

    The following is the text of a question and answer from the 
    Fatwa Council of the Kuwaiti Finance House: 

    Question: 

    Is it permissible to buy and sell shares in foreign companies 
    such as General Motors, Phillips and Mercedes, knowing that these are 
    manufacturing companies, but they do not hesitate to lend and borrow money 
    with interest? 

    Answer: 

    The principle of buying shares in manufacturing, commercial 
    and agricultural companies is allowed according to sharee’ah, because they 
    are subject to either profit or loss, and this is akin to mudaarabah or 
    limited partnerships which the Lawgiver allows, subject to the condition 
    that this partnership avoid engaging in riba transactions, whether that 
    involves taking or paying interest. It may be understood from your question 
    that you are aware that these companies deal with riba, taking and paying 
    interest. On this basis, buying shares in them is to be regarded as buying 
    shares in a riba-based operation, which is forbidden in sharee’ah.  And 
    Allaah knows best.

    Kitaab al-Fataawa al-Shar’iyyah 
    fi’l-Masaa’il al-Iqtisaadiyyaah, al-Ajzaa’ Bayt al-Tamweel al-Kuwaiti, 
    Fatwa No. 532.

     And Allaah knows best.