The difference between shares and stocks

Firstly: 

With regard to zakaah on shares, we have discussed the zakaah
on them in detail in question no. [69912].
We stated there that there are some kinds of shares on which zakaah is due,
and others on which no zakaah is due. 

With regard to stocks, they are something different than
shares. 

A stock is a written document stating the amount of a loan
given by the bearer on a specified date in return for specified interest. 

A share is a partner’s portion of the capital of a
corporation. 

From these definitions we can see the difference between
shares and stocks. 

The difference between shares and stocks: 

1 – A share represents a stake in a company, meaning that the
shareholder is a partner, whereas a stock represents a debt owed by the
company, meaning that the stockholder is a lender. 

Based on this, the shareholder only earns profits when the
company makes a profit, whereas the stockholder earns guaranteed annual
interest whether the company makes a profit or not. 

Also based on this, if the company makes a loss, the
shareholder has to bear some part of the loss, depending on the amount of
shares he has, because he is a partner and owner of part of the company, so
he must bear some part of the loss. 

The stockholder, on the other hand, does not bear any of the
company’s losses because he is not a partner in the company, rather he is
simply a lender, who lends money in return for benefits agreed upon whether
the company makes a profit or makes losses. 

Ruling on dealing in stocks: 

Dealing in stocks is haraam according to sharee’ah, because
it is a loan in return for agreed-upon interest, and this is riba (usury)
which Allaah has forbidden and warned against, as He says (interpretation of
the meaning): 

“O you who believe! Fear Allaah and give up what remains
(due to you) from Ribaa (from now onward) if you are (really) believers.

279. And if you do not do it, then take a notice of war
from Allaah and His Messenger but if you repent, you shall have your capital
sums. Deal not unjustly (by asking more than your capital sums), and you
shall not be dealt with unjustly (by receiving less than your capital sums)”

[al-Baqarah 2:278-279] 

The Messenger (peace and blessings of Allaah be upon
him) cursed the one who consumes riba, the one who pays it, the one who
writes it down and the two who witness it, and he said: they are all the
same. Narrated by Muslim, 2995. 

In the second conference of the Islamic Bank in Kuwait 1403
AH/1982 CE it was stated: That which is called interest in the terminology
of western economists and those who follow them is the essence of riba that
is forbidden according to sharee’ah. End quote. 

Majallat al-Majma’ al-Fiqhi,
4/1/732 

See also the answer to question no.
2143. 

Zakaah on stocks 

Although it is haraam to deal in stocks, zakaah is due on
them because they represent a debt owed to their owner, and debts that one
hopes will be repaid are subject to zakaah according to the majority of
scholars. So its zakaah must be worked out every year, but it need not be
paid until one takes possession of the value of the stock. As for the
interest that is taken in return for the stock, this is unclean and haraam
wealth that must be disposed of by donating it to charitable causes. 

The rate of zakaah which must be paid is 2.5 per cent.