Partnerships & Investment Structures
Agree the terms while you still agree.
Two people, one venture. Or one person’s money and another’s work. Islamic law has structured both for centuries, and English law will enforce both, if the documents are right.
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The starting point
If you write nothing, you have still agreed to something.
The moment two people trade together for profit, the Partnership Act 1890 applies. Its defaults are blunt.
- Equal shares by default, whoever invested more or worked harder.
- Personal liability. Your partner’s business debts can become your problem.
- Dissolution at will, or on death. One resignation or one funeral can legally end the firm.
- Memory versus paper. In a dispute, the unwritten deal is whatever the other side now remembers.
The structures
Old structures, modern paperwork
- MusharakahCapital from all sides
All partners put in capital, all share the outcome. Profit is split in whatever ratio you agree. Loss is shared strictly in proportion to capital.
- MudarabahMoney on one side, work on the other
One party funds, the other manages. Profit is shared by an agreed ratio. If the venture loses money without misconduct, the investor loses capital and the manager loses their effort. Neither is guaranteed anything.
- The wrapperCompany · LLP · partnership deed
These economics fit the vehicles English law knows: a company with a shareholders’ agreement, an LLP with a members’ agreement, or a partnership deed. The vehicle affects liability, tax and formality.
- The exitAgreed at the start
How a partner leaves, how their share is valued, what happens on death, who can buy whom out. The questions nobody wants to raise at the start are the ones the agreement must answer.
Where it goes wrong
“My capital back whatever happens, plus a fixed monthly return.”
That is the most common request we hear, and it is not a partnership. It is a loan with interest in a partnership’s clothes. In Islamic commercial law, return follows risk. An investor who bears no risk of loss has lent money, and a fixed return on it is riba.
The honest alternative is more precise, not less commercial. Profit ratios can favour the investor. Capital can be protected by how the venture is run and returned first on winding up. What it cannot be is guaranteed by the person managing it.
How we help
The economics agreed, then made enforceable
We start with the substance: what each side contributes, what each expects, and what happens in the good years, the bad years and the last year. Our scholars test it against Islamic commercial principles. Our advisers map it onto the right English vehicle. Then it goes to drafting. Where regulated legal services are required, these are provided by our partner SRA-regulated law firm.
If your partnership already exists with nothing in writing, the work is the same: establish what has been agreed and contributed so far, then put it on a footing both systems respect.
LawFiq advises on principles, structure and documents. We do not promote investment opportunities, introduce investors, recommend financial products or arrange investments. Those activities are regulated by the Financial Conduct Authority and belong with an FCA-authorised firm. If your plans involve raising money from the public, tell us early.
Common questions
What partners ask us
We started years ago with nothing in writing. Is it too late?
No. An existing partnership can be documented from where it stands: contributions to date established, profits acknowledged, terms agreed from here on. Most partners find the conversation easier than they feared, because relations are still good. That is the time to have it.
Can a non-Muslim partner be part of this?
Yes. Musharakah and mudarabah describe fair economics: shared risk, shared reward, clear terms. The agreement is an ordinary English commercial document. Your partner signs terms, not theology.
Related services
Book a consultation
Before any of it is urgent.
A confidential conversation about capital, work, profit, loss and exit.
Or call 020 3930 1088