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This letter was initially sent by email, to which I have not received a response. I also tweetted and hope this post reaches into the authors. A new methodology to calculate zakat on long term shares has been growing in influence. It argues for a 70% discount on zakat obligations against long term shares. The methodology has been supported by Sh joe Bradford in 2015, and more recently by the Shariyah Review Bureau, North America Fiqh Council and others. It is now used by services like Wahed Invest, Zoya Finance, or LaunchGood. And I see more and more apps trying to use this method as a service for their customers.

In the below letter, I question the precise illah (legal cause) by which minority corporate shareholding is treated as if it were a direct partnership in zakatable assets, despite the corporation’s separate legal personality and the shareholder’s lack of tasarruf over underlying assets.

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Dear Esteemed Scholars,

I have been reading your work with appreciation, especially your efforts to simplify the complexities of zakat calculation for modern investors. Your intention to make these matters accessible is commendable, and it is clear that you have put considerable thought into creating a practical framework. With that said, I would like to offer a gentle clarification on one specific point: the zakat calculation for long-term shares.

Objective of the letter

This letter is not an attempt to revise your exegesis of the religious sources on zakat. Its objective is to clarify the definition of shares and explain why they cannot be treated as sole proprietorship or general partnership for the zakat calculation. There are fundament reasons that make the two types of properties distinct legally and economically. Those distinctions bear directly on the fiqh condition of complete ownership/dominion (al-milk / al-tasarruf).

The methodology under review

In the book ‘Simple Zakat Guide’ published in 2015, Sh. Joe Bradford defines the zakat for a long term shareholder, to be not 2.5% of the market price of the shares, but 2.5% of the sum of the company’s cash, receivables and inventory ("CRI"). He further simplifies the calculation to assume that it can approximate to 2.5% of 30% of the share price. The opinion has been highly influential and since, similar variations of it have been issued: the Fiqh Council of North America advising to use the book value of a company (November 27, 2025), Shariyah Review Bureau validating the same methodology (February 25, 2025). As a result, most of the reputable muslim financial apps are now suggesting this calculation as an option to their customers: Wahed, Zoya, Launchgood, ... The argument for it, is a parallel made between a shareholder and a shoemaker (See Sh. Joe Bradford). In fact, the shoe manufacturer only pays zakat on "CRI" and not on productive assets (such as a hammer). While the suggested calculation is correct in the case of a shoe maker, the underlying assumption that a shareholder can be treated as a sole proprietor or partner is incorrect.

The core legal distinction: sole proprietorship/general partnership vs shareholder

A corporation is a separate legal entity that owns its assets in its own name. A shareholder owns shares, not the corporation’s underlying property; shareholders generally have no legal right to the company’s assets as assets. This principle originated from landmark cases, such as Salomon v. Salomon & Co. Ltd. (1897), which established that corporate property is distinct from the property of its shareholders. The shareholder has a financial interest in the company, but does not have a dominion over these assets. As opposed to the controlling partner or a sole proprietor (as a shoe maker), a shareholder does not have:

• The right to take inventory
• The right to collect receivables
• The right to dispose of company cash
• The right to access or use corporate property

A shareholder only has:

• Voting rights (governance right)
• Dividend rights (conditional on board declaration)
• Residual claim upon liquidation

That legal architecture is not a technicality—it is the entire point of corporate personhood: asset partitioning, limited liability, centralized control, and residual claims. Therefore, when a minority shareholder “owns” Apple, Microsoft, or an S&P 500 ETF, their ownership is not a direct, divisible ownership of the firm’s cash, receivables, or inventory. Their owned asset is the share itself.

The accounting mirror: GAAP/IFRS recognize the same distinction

Modern financial reporting largely reflects this legal/economic split:

• Public equity securities (typical minority shareholding):measured at fair value, with changes recognized in earnings under US GAAP (ASC 321). Under IFRS, equity investments are also measured at fair value by default under IFRS 9 (with limited presentation options like FVOCI for certain elections).
• Equity method (closer to “partnership-like” influence): used when the investor has significant influence, and the carrying amount tracks the investor’s share of the investee’s net assets and results (ASC 323 / IAS 28). This distinction matters for zakah reasoning: only in the “influence / quasi-co-ownership” zone does a book-value, net-asset-linked view begin to resemble the investor’s economic position. For the ordinary shareholder, the recognized asset is the share at fair value—again aligning with dominion over the security, not dominion over underlying inventory or receivables.

Fiqh - Ownership Condition

A key condition for an asset to be in scope for zakat is that its owner has an undivided and absolute right of ownership. Ownership means \textit{“authority that enables the owner to use the owned thing and get the benefit of all its utilities in a perpetual and exclusive manner”} (Al Bahr al Raiq, Vol 2, 218). A full derivation for this condition can be found in Fiqh al Zakah (Vol. I), Dr. Yusuf al Qardawi, Chapter 1. Applied here: A shareholder can dispose of their share (sell it, gift it, pledge it, etc.). A shareholder generally cannot dispose of, demand, or partition the company’s cash, accounts receivable, or inventory (nor can they compel a pro-rata distribution at will). So, if “complete ownership” is understood as unrestricted disposal power, the shareholder’s dominion attaches to the security, not to the underlying balance-sheet line items. That is why the look-through basis (cash/AR/inventory) risks treating the shareholder as if they possess milk over assets they legally cannot control or access.

Applications

The methodology under review, poses a number of issues when applied numerically to real life situations.

Shareholder paying no zakat over their holdings

Franchise companies have little or no assets. This is because they charge a fee to their franchisees but do not own the walls. So taking that calculation, as of December 8, a Macdonalds shareholder would only pay 0.06% of zakat on the dollar if using the "CRI" method and 0 if the book value method is used. The argument that they would pay zakat over dividend payment is also flawed, because for many of these public companies, the shareholders are compensated through share buy back programs. Which means under this methodology, a McDonalds shareholder would see a 7,000% return on that stock without ever paying zakat on it.

Shareholder paying a zakat higher than the value of their holdings

For a bankrupt company, the asset value held by the corporation can be above enterprise value. The reason is these assets go against more secured holders (bondholders, etc). For instance, a 150$ position in FOXO as of Dec8 gives, using the "CRI" calculation a zakat of 12,433$. Way above the wealth of the holder (see Figure in below);

The 30% approximation is statistically wrong

In the book ‘Simple Zakat Guide’, Sh. Joe Bradford writes: "A quicker way to find the CRI value of a stock or fund is to simply use 30% of the market value of the stock or fund. This rule of thumb is based on a survey of the market and the average CRI value of most shares available in the market. Through my research, I've found that the average CRI value of a random stock is 25%-30%" As a result, many websites assume any share held zakat can be haircut by 70%. That approximation is incorrect. To begin with, that approximation was made in 2015. If done today, the haircut would be 80% - See Figure below. In addition, while there is some correlation, that approximation remains incorrect for most of the traded stocks in the SnP500 - See Figure in below.

Additional Remarks

At a time wealth inequalities are at an all time high, it is important to observe they are mostly driven by a class of investors that were able to accumulate capital in the form of shares. Zakat offers a virtuous mechanism to transfer some that wealth into the most vulnerable part of the society. While this was not the intent of this methodology, it does in practice reinforces the inequalities by providing the wealthiest with a 70% haircut over their charitable contributions.

A proposed correction

A dominion-consistent approach would begin from the asset the person actually owns and can dispose of:

• For publicly traded shares: zakāh at 2.5% of the share’s market value at the zakāh date (plus any zakatable cash/dividends held). One may consider removing as well the latent capital gains taxes from the zakatable assets, in the instance it is paid in dollars and not in kind (shares can be paid in kind through Donor Advised Funds, etc - in which case no capital gains tax is paid). This aligns with the Council’s own treatment of “trade goods” and aligns with the shareholder’s actual dominion over the share.
• For true partnership/co-ownership structures (or equity-method / significant influence situations where look-through resembles the investor’s enforceable economic position): a look-through (or net-asset-based) zakah may be more defensible, because the ownership incidents are closer to the underlying assets.

Closing request

I offer this in the spirit of scholarly refinement: I respectfully ask that the authors to clarify the precise \textit{illah} (legal cause) by which minority corporate shareholding is treated as if it were a direct partnership interest in zakatable assets, despite the corporation’s separate legal personality and the shareholder’s lack of tasarruf over underlying assets.

May Allāh grant you tawfīq in serving the community with precision and balance.

Respectfully,

Dey ex-Machina

To: Fiqh Council of North America Shaykh Joe Bradford Shaykh Umer Khan Shaikh Dr. Sajid Umar Shaikh Dr. Mohamad Akram Laldin Shariyah Review Bureau

December 14, 2025.

deyexmachina@proton.me