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Inheritance Under Muslim Law
Muslim Law

Inheritance Under Muslim Law

Introduction

Inheritance is a fundamental aspect of legal systems worldwide, guiding the distribution of property and assets after a person's death. In Muslim-majority countries and communities, inheritance is governed by Islamic law, also known as Shariah. This system outlines specific rules and guidelines for the distribution of wealth among heirs, ensuring fairness and justice in the process.

 

Introduction to Islamic Law and Inheritance

Islamic law is derived from the Quran, the Hadith (sayings and actions of Prophet Muhammad), and the consensus of Islamic scholars. It covers various aspects of life, including family matters, commerce, and governance. Inheritance, as delineated in Islamic law, is a crucial component of familial relations and financial security.

 

Key Principles of Inheritance in Islam

  1. Allah's Will: Muslims believe that inheritance laws are divine commands ordained by Allah. As such, adhering to these laws is not only a legal obligation but also a religious duty.

  2. Fairness and Equity: Islamic inheritance laws emphasize fairness and equity among heirs. Each eligible relative is entitled to a specific share of the deceased's estate, ensuring that wealth is distributed justly.

  3. Prescribed Shares: Islamic law prescribes fixed shares for various relatives, including spouses, children, parents, and siblings. These shares are calculated based on predefined proportions, regardless of the deceased's wishes or bequests.

  4. Prohibition of Disinheritance: In Islam, heirs cannot be disinherited arbitrarily. While the deceased may allocate up to one-third of their estate for charitable purposes or individuals not entitled to inherit, the remaining two-thirds must be distributed among eligible heirs according to Shariah.

Heirs According to Islamic Law

  1. Primary Heirs:

    • Children: Sons and daughters are primary heirs in Islamic inheritance. Sons typically receive double the share of daughters, reflecting traditional gender roles and responsibilities.

    • Spouse: The surviving spouse is entitled to a specific share of the estate, depending on whether there are children or other heirs.

  2. Secondary Heirs:

    • Parents: If the deceased has no surviving children, their parents become eligible heirs, with the mother typically receiving half the share of the father.

    • Grandchildren: In the absence of children, grandchildren may inherit a portion of the estate.

  3. Residuaries:

    • Siblings: Brothers and sisters inherit from the deceased if there are no children, parents, or spouses. The share is divided equally among siblings, with male siblings receiving twice the share of their female counterparts.

Calculation of Shares in Islamic Inheritance

Islamic inheritance law follows a precise formula for calculating shares, ensuring that each eligible heir receives their prescribed portion of the estate. The process involves several steps:

 

  1. Identifying the Estate: The first step is to determine the total value of the deceased's estate, including assets, properties, and debts.

  2. Deducting Funeral Expenses and Debts: Funeral expenses and outstanding debts are subtracted from the estate's value to arrive at the net estate.

  3. Allocating Shares: Each eligible heir is allocated their respective share based on the predefined proportions outlined in Islamic law.

  4. Distribution of Residue: After allocating shares to primary and secondary heirs, any remaining portion of the estate is distributed among residuaries, such as siblings or other relatives.

Challenges and Contemporary Issues

While Islamic inheritance laws provide a framework for equitable distribution, certain challenges and contemporary issues have emerged:

 

  1. Changing Family Structures: Modern family structures, including blended families, remarriages, and non-traditional relationships, pose challenges in applying traditional inheritance laws.

  2. Legal Pluralism: In many countries, Islamic inheritance laws coexist with secular legal systems, leading to complexities and conflicts, particularly in matters of jurisdiction and enforcement.

  3. Women's Rights: While Islamic inheritance laws provide specific shares for female heirs, debates persist regarding gender equality and women's rights in inheritance, with some advocating for reforms to address inequalities.

  4. Interpretation and Application: The interpretation and application of Islamic inheritance laws vary among scholars and legal authorities, leading to discrepancies and differing opinions on certain issues.

Conclusion

Inheritance under Muslim law is a multifaceted aspect of Islamic jurisprudence, guided by principles of fairness, equity, and divine commandments. While the system provides a structured framework for the distribution of wealth among heirs, contemporary challenges and evolving societal norms necessitate ongoing dialogue and adaptation. By understanding the principles and intricacies of Islamic inheritance, individuals and communities can navigate this aspect of Shariah law while upholding justice and familial harmony.

 

 

FAQs (Frequently Asked Questions) About Inheritance Under Muslim Law

1. What is Islamic inheritance law, and why is it important?

Islamic inheritance law is a system that governs the distribution of assets and property among heirs after a person's death. It's crucial because it ensures fairness and justice in the allocation of wealth, guided by principles outlined in the Quran and Hadith.

2. Who are considered primary heirs under Islamic inheritance law?

Primary heirs typically include children and spouses. Sons and daughters are entitled to inherit, with sons receiving double the share of daughters. The surviving spouse also receives a predetermined portion of the estate.

3. How are shares calculated in Islamic inheritance?

Shares are calculated based on predetermined proportions outlined in Islamic law. These proportions vary depending on the relationship of the heir to the deceased, such as children, spouses, parents, and siblings.

4. Can heirs be disinherited under Islamic law?

In general, Islamic law prohibits arbitrary disinheriting of heirs. While the deceased can allocate up to one-third of their estate for charitable purposes or individuals not entitled to inherit, the remaining two-thirds must be distributed among eligible heirs according to Shariah.

5. What happens if there are no direct descendants or spouses?

In the absence of direct descendants or spouses, other relatives such as parents and siblings become eligible heirs. The estate is distributed among these secondary heirs according to prescribed shares.

6. Are there provisions for adopted children in Islamic inheritance law?

Islamic inheritance law does not typically recognize adopted children in the same manner as biological children. However, some scholars argue for provisions to ensure fairness in cases of adoption.

7. How does Islamic inheritance law address modern family structures and non-traditional relationships?

Modern family structures, including blended families and non-traditional relationships, present challenges in applying traditional inheritance laws. Scholars and legal authorities continue to debate and adapt principles to address these evolving dynamics.

8. What role do Islamic scholars and legal authorities play in interpreting inheritance laws?

Islamic scholars and legal authorities interpret and apply inheritance laws based on Quranic principles, Hadith, and scholarly consensus. However, interpretations may vary, leading to discrepancies and differing opinions on certain issues.

9. Are there gender disparities in Islamic inheritance law?

Islamic inheritance laws provide specific shares for male and female heirs, with sons typically receiving double the share of daughters. While some advocate for reforms to address gender inequalities, others emphasize the importance of adhering to traditional interpretations.

10. How do Islamic inheritance laws coexist with secular legal systems in diverse societies?

In many countries, Islamic inheritance laws coexist with secular legal systems, leading to legal pluralism and complexities in matters of jurisdiction and enforcement. Dialogue and collaboration among legal authorities are essential to navigate these complexities effectively.
Sweat Equity Shares
Labour & Employment

Sweat Equity Shares

Sweat equity shares are given to employees for their hard work and commitment to the organisation. While, many people confuse Employee stock options with sweat equity shares, the two are different and target different stakeholders. Let us understand the mechanics behind sweat equity shares.

What are sweat equity shares?

Talented and highly skilled employees are assets for any organisation. They are essential for any company’s success. Therefore, companies resort to transferring ownership of their shares to show their appreciation for work done or contributions made by such employees. One such way of transferring these shares is by issuing sweat equity.

Sweat equity as, equity shares provided by a corporation to its directors or workers at a discount or for any consideration besides cash in exchange for sharing their know-how (technical, practical knowledge or skill) or making available rights in the form of intellectual property rights or value additions, under whatever name they are known. A company can only issue sweat shares of a class already issued. The rights, limitations, and restrictions applicable to such shares are the same as those of equity shares.

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The companies are regulated by Section 54 of the Act and Rule 8 of Companies (Share Capital and Debentures) Rules (“the Rules”), 2014 while issuing such equities. Furthermore, a listed company must also comply with the relevant SEBI regulations and guidelines.

Whom are sweat equity shares issued to?

As noted above sweat equity shares are issued to employees or directors at a discount (to market price) or for providing know-how or making available rights like intellectual property rights or value additions.

Director- includes a whole-time director and other directors of the company and its subsidiary or holding company, in India or outside India. Whereas, Rule 8 of the Rules, defines 'employee' as a permanent employee who has been serving in India or outside of India for at least one year. Furthermore, it also includes an employee of a subsidiary in India or outside India or a holding company of the corporation. Thus, sweat shares cannot be issued to any temporary employee or an employee of another entity providing service to the relevant company to discharge his/her duty in his /her original company.

As per Section 54, such shares can only be issued after receiving authorisation by a special resolution. Specifying “the number of shares, the current market price, consideration, if any, and the class or classes of directors or classes employees...". Furthermore, such shares are locked in for 3 years and cannot be transferred for such a period.

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Difference between ESOP and sweat equity shares. 

Another method of providing the employee with an option to gain ownership of its share equities are ESOP. However, both sweat equity shares and ESOP are quite different. An ESOP is not an issuance of share per se but an option to buy shares at a pre-determined price. Sweat equity amounts to actual issuance of shares. A sweat equity may be given to promoters but ESOPs are typically not granted to promoters of an entity. Under ESOP, no ownership passes, but only an option is granted. Typically a threshold is imposed, beyond which companies cannot issue sweat equity shares, however, no such limits bar the granting of ESOPs. Example of sweat equity shares is grant of 5% shares in the company to an employee in return for his performance. An example of ESOP is the grant of an option to an employee to buy 100 shares of the Company at a discounted rate.

How is the valuation of sweat equity shares done?

The sweat equity shares to be issued must be valued at a fair price assessed by a registered valuer. A reason for such pricing must also be provided. A registered valuer shall carry out the valuation of intellectual property rights, know-how, or value additions for which sweat equity shares are to be granted, and shall give a proper report addressed to the Board of Directors with rationale for such valuation.

The listed company may determine the price of their issue by taking into account the average of the weekly high and low closing prices of the related equity shares over the past 6 months before the relevant date, or the average of the weekly high and low closing prices of the related equity shares over the last two weeks preceding the relevant date.

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In the case of listed companies, the SEBI regulation provides that the valuer of the issue must be a merchant banker to valuation know-how or IPR etc. The merchant banker may confer with as many specialists and valuers as he deems necessary, considering the nature of the industry and the nature of the property or other value addition. The merchant banker must take a certificate from an independent chartered account for such valuation.

An unlisted company may also issue sweat equity shares however, there are certain limits placed on the quantum of shares to be issued.

Sweat equity shares are an integral part of a company’s scaling up process. It is pertinent that companies comply with the applicable laws while issuing sweat equity shares.