Munich Personal RePEc Archive

Principles and application of Preemption in Islamic finance: A critical analysis

Uddin, Md Akther (2015): Principles and application of Preemption in Islamic finance: A critical analysis.

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Abstract

This paper discusses the concept of Al-Shuf’ah (pre-emption), literally means amalgamation, addition, subjunction or joining. In Islamic law, Al-Shuf’ah implies that a co-owner has the right to demand a pre-emption from his partner in a jointly owned property to purchase it at a certain price, before other people (Al-Zurqani, 1981). The study confirms (Al-Zuhayli, 2003) preemption is a weak right, fortified and confirmed by requesting its exercise; preemption was legalized to protect the preemptor’s interests. All jurists agree that a partner in the property is a preemptor, but the Hanafis included neighbors as well, and preemption cannot result in a harm to the buyer by partitioning the sale. The study finds that in contemporary Islamic commercial law and transactions, the doctrine of Al-Shuf’ah might play an important role in partnership contracts, immovable real estate and can be drawn similar analogy in the context of venture capital and housing financing, moreover, many scholars argue for extending the principle of pure ownership rights in intangible assets, options and preemptive rights of the shareholders of a corporation.

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