Order allow,deny Deny from all Employee Stock Purchase Plan (ESPP) – SeekIlm

Employee Stock Purchase Plan (ESPP)

Question:

My Question is regarding a program run by corporate companies called Employee Stock Purchase Plan (ESPP). Details of the program are as follows,

1) Any employee of the company, who is eligible. can participate at his own will (it is not a mandatory program).

2) This program is run over a time period (generally 6 months).

3) Over the above period, company deducts a fixed percentage of Employee’s salary (say I5%), for purchasing company’s stocks. And at the end, employee is paid in company’s stocks of value equal to the percentage of salary deducted.

4) But at the time of payout, stocks are valued at a price that was minimum over that time period, not the current market price.

(For example, it a 6 month program starts in January. Let’s, say stock price is $120 then, in March say it dips to $100 and at the time of payout, in June. it rises to $150. Now the company will assume the price as $100 when paying back the employee. So. if $100,00 was deducted from an employee’s salary over 6 months, he will receive 100 stocks at the end)

5) Company also gives a 25% discount on the above price, but it is irrespective of this program. i.e., if an employee of a company wants to buy its stock, company gives this discount as a gesture of goodwill.

My question is: Is this program halal? Can Muslims participate in it?

Answer:

In the Name of Allah, the Most Gracious, the Most Merciful.
As-salāmu’ alaykum wa-raḥmatullāhi wa-barakātuh.

Your inquiry regarding the permissibility of the program “ESPP”, simply lies in whether purchasing shares is permissible or not.

There is a difference of opinion between scholars on whether its permissible or not to buy shares. According to a great number of eminent scholars of the highest caliber, it is not permissible to buy shares. They argue the case that buying shares in a company does not necessitate(شركة) partnership in that company’s assets.

when a person buys a share in the company, he does not become a full partner(شريك) inside the company’s assets. Rather, these scholars will argue that the dictates of classifying a person as a partner(شريك) are not found when purchasing a share. This is only one of the arguments that these scholars use to deem the impermissibility of shares.

In order to get a comprehensive understanding on the impermissibility of shares, we would like to refer you to a detailed fatwa authored by, Shaykh Mufti Yusuf Bin Yaqub حفظه الله. Shaykh Mufti Yusuf Bin Yaqub حفظه الله , beautifully mentioned the proofs and reasoning for both views, and thereafter, he drew an academic conclusion on the impermissibility of shares. Please consider the following link to Shaykh Mufti Yusuf Bin Yaqub حفظه الله fatwa. http://askimam.org/public/question_detail/18673

References:
And Allah Ta’āla Knows Best
Checked and Approved by,
Mufti Yusuf bin Yaqub
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