Understanding Halal Business & Halal Investments In India

Assalamualaikum

This thread is the genuine research work done by Indian Muslims team in the field of Islamic Finance. You can read this article on Islamic Board : Halal Investments & Halal Business In India

Assalamualaikum! There are a lot of misconceptions about Halal Investments In India. Because of this large number of frauds are happening. And many Muslims are losing their hard-earned money worth billions (of Muslim wealth). Further, even the so-called finance experts in India are mostly Hindus who are not aware of the actual rulings of Islam. Hence, I have started this thread to educate people about the real concept of Halal Investments, Halal Business & Islamic Finance. I am an MBA Graduate, having experience as a Business Development charge for various startup projects. I have helped companies to grow from scratch and establish businesses. I have done a lot of research in Islamic Finance and I strongly believe, the schemes which are being offered by Halal Companies in India are not at all halal. And thus are ending up winding up businesses and leaving a lot of financial damage to the community.

Our aim is also to educate and empower the Muslim Community, not just in India but also in abroad countries. Thus, we have provided some free services for students, and entrepreneurs to avail the benefits and grow their careers. InshaAllah. We are available at https://www.indianmuslims.co.in (please visit and install this application on your mobile for regular updates) and inshaAllah I will be posting more information about halal jobs, halal investments, halal business, and Islamic finance in this thread. JazakAllah

You can also refer to my other post regarding the process of Halal Jobs & Business

Types of Business Partnerships:

In order to understand Halal Investments. First, we need to understand the types of partnerships

1. Sole Proprietor

Usually, many startups or small businesses go for sole proprietorship registration. In this case, the business owner is only one person. There are no other legal partners in the business. Sole Proprietorship registration is usually done at the state level through a labour license or trade license. There is no formal registration process and the complete control of the business lies with one person. In this case, the pan card of the owner is used.

However, in order to bring full validity and formal registration to this method of business. The Ministry of Corporate Affairs (MCA) has introduced (OPC) Private Limited. OPC Stands for "One Person Company". This stands the same as Sole Proprietor with one person having complete control over the company. But with formal registration. In this case, a new pan card is issued in the name of the company. And the company name ends with OPC Private Limited.

2. Firm Registration

A firm is registered when two or more persons come together to form a company. In this case, a memorandum is made outlining the ratio of investment of partners. For example, two investors, investing 50:50% or three partners investing 33:33:34%, etc.. The ratio is divided according to the investment done by a partner. However, in this case, one partner is considered as a managing partner and the other as a sleeping partner. This process can be registered at state level and firm registration certificate is issued. And a new pan card is issued in the name of the firm.

MCA does this process of registration through LLP (Limited Liability Partnership). Where the partners are considered as directors of the company and a formal registration is issued with the company name ending with LLP.

3. Private Limited

Private Limited required minimum 2 directors (partners) to register a company. And maximum of 200 shareholders (partners) or investors. A new pan card is issued in the name of private limited.

4. Public Limited

Public Limited requires minimum of 3 directors, 7 share holders and there is no limit for maximum number of share holders in public limited. A new pan card is issued to a public limited company.

Above four are the legal form of business registrations in India, where investment can be invited. However, in order to legally register your investment. You should be either direct partner or share holder which requires you to sign legal documents and submit to the government.

However, many companies offer halal investment opportunities without legally registering the people who are investing in the above methods. In this case, you are not a direct partner of the company, but you just invest with the company. This method is called as hedge fund. Where you just invest your money and take profits/losses.. you are not legal partner in the company.

However, even this method of investing is legal in India. In this case, the company managing your investment is called as "Hedge Fund Manager" and you are not a direct investor or partner of the company. Your investment can be any time accepted or removed in hedge fund. Whereas if you are a legal partner (or share holder) as mentioned in above companies process. Then the company should follow the legal procedure to remove you as a partner and should be intimated to the government. Please remember sole proprietor or OPC cannot register you as legal partners. They can only act as Hedge Fund Managers.