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Business Partnership Status After One Partner’s Death
Salam,
Scenario:
Two brothers were in equal partnership 50/50 in a manufacturing business. One brother passed away and the other has since been solely managing the whole business. Deceased heirs are either under age or in education and didn’t join the business.
Questions:
1- What’s the status of this partnership? Is it still active or considered as ceased?
2- If active, would it still be with the same equal share or does it become 30% for deceased and 70% for the remaining partner?
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4 Replies
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Business Partnership Status After One Partner’s Death
updated 3 months ago
2 Members
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4
Replies
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Just to add, I understand that all assets, liabilities including profits etc at the time of partner’s death will be equally distributed.
My questions are more about running business profits and any change in assets and liabilities etc since the death.
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After distribution of the dead partner’s 50% share to his legal heirs, the partnership will be considered dissolved. Until the time such distribution is made, the share would stay 50/50 because the deceased partner’s assets are still employed in the business. However, the partner alive, who is managing the business, may charge management fee from the share of the deceased partner and it is better to have that fee agreed before hand from the heirs of the deceased partner. The fee should be reasonable and customary according to the norms of the industry.
If the heirs of the deceased are underage and the partner alive is also acting as a guardian of those children, then the following Sharia Directives would apply:
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Thank you for the swift response. I now have another question based on your comments that needs some guidance.
For the partnership to be considered dissolved, does the distribution of the 50% share have to be handed over to the deceased heirs OR can it also be done by just calculating and recording the distributed share at the time of death which will later be handed over to the heirs when they reach the maturity age/able to manage their wealth?
The living partner is not the legal guardian but is guarding the wealth for the deceased heirs by mutual family agreement.
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Both options can be excercised. However in case of calculation and recording of the distributed share for future disbursement, the active partner should make sure that the deceased partner’s share or equivalent amount be readily available for encashment upon demand or be made available in a reasonable amount of time.
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