The Share, the Shoemaker, and the Structure of Zakat: A Response
On why the CRI methodology is not a "70% haircut" but the only coherent application of classical Zakat principles to modern equity holdings.
A recent open letter from an anonymous writer, addressed to myself, the Fiqh Council of North America, and the Shariyah Review Bureau, argues that the CRI methodology I introduced in Simple Zakat Guide (2015) for calculating Zakat on long-term shares is fundamentally flawed. The author contends that minority shareholders should pay Zakat on the full market value of their shares, not on the proportional current assets (cash, receivables, and inventory) of the underlying company.
The letter is written with care and raises questions that deserve a serious answer. I take the author’s concern for the poor and for scholarly precision at face value. But the argument, once examined on its own terms, does not hold together. It contains a critical misapplication of Western case law, a structural contradiction at its core, and leads, if followed to its logical end, not to more Zakat being paid but to a framework in which no Zakat on passive shares is owed at all.
Part One: The Author’s Argument
The author’s case rests on a single foundational claim: that a minority shareholder in a publicly traded corporation cannot be treated like a sole proprietor or partner for Zakat purposes, because the shareholder lacks direct ownership (milk) and dispositive control (tasarruf) over the company’s underlying assets.
In support, the author makes three subordinate arguments:
First, a legal argument. Citing Salomon v. Salomon & Co. Ltd. (1897), the author asserts that a corporation is a separate legal entity, and therefore the shareholder "owns shares, not the corporation’s underlying property."
Second, a fiqh argument. Drawing on Al-Bahr al-Ra’iq and al-Qaradawi’s Fiqh al-Zakah, the author argues that Zakat requires "undivided and absolute right of ownership," defined as the authority to use and benefit from a thing in a "perpetual and exclusive manner." Since the shareholder lacks this authority over the company’s balance sheet items, dominion attaches to the security itself, not to the underlying assets.
Third, an accounting argument. Under US GAAP (ASC 321) and IFRS 9, minority equity positions are measured at fair value (market price).
Part Two: What the Author’s Argument Actually Produces
The Salomon Problem
Salomon v. Salomon is a case about liability, not ownership. Aron Salomon incorporated his sole proprietorship and later went insolvent. The House of Lords held that the company was a valid separate legal entity and that creditors could not pierce the corporate veil to reach Salomon’s personal assets.
This establishes a liability shield: creditors of the company cannot pursue the shareholder personally. It does not establish an ownership void: that the shareholder has no economic interest in what the company holds. These are distinct legal propositions. Salomon’s shareholders still had a residual claim on the company’s assets in liquidation.
Moreover, the principle the author is reaching for already exists in the Islamic legal tradition. The rule al-wadi’ah ‘ala ra’s al-mal establishes that loss falls on capital, not on the partner personally. Yet no scholar has ever argued that a partner’s exemption from personal liability for partnership debts means the partner has no milk over their proportional share of the partnership’s zakatable wealth.
The Structural Contradiction
Here is where the author’s argument defeats itself.
The author argues that the shareholder has no tasarruf over the company’s underlying assets. Therefore, we cannot "look through" to the company’s cash, receivables, or inventory, because the shareholder does not own them.
But the author then concludes that the shareholder should pay Zakat at 2.5% of the share’s market value. That market value is itself derived from the company’s underlying assets, including its fixed assets, intellectual property, brand value, real estate, and equipment.
This creates an inescapable problem. The classical exemption of productive assets (alat al-san’ah, ‘urud al-qinyah) from Zakat is a matter of consensus across the schools. The shoemaker does not pay Zakat on his hammer. The factory owner does not pay on his machinery. The market price of a share in Apple, Microsoft, or McDonald’s reflects the value of server farms, campuses, patents, brand equity, franchise agreements, and equipment. None of these are zakatable under any classical framework.
The author cannot sever the shareholder’s connection to the underlying assets (to reject the CRI look-through) and then reconnect the shareholder to those same assets through market price (to impose full-value Zakat). This is not a consistent legal argument. It is two incompatible positions held simultaneously.
The Catastrophic Endpoint
If we take the author’s tasarruf argument seriously and follow it to its conclusion, the result is not "pay Zakat on market value." The result is no Zakat on passive shares at all.
The reasoning is straightforward: the share itself, as a standalone abstract right, does not fall neatly into any classical category of zakatable wealth. For the passive investor, it is not cash. It is not trade goods the holder is actively trading.
There is a further problem. Contemporary scholars near-unanimously require purification (tathir) of earnings from shares in companies with mixed-income activities. This purification obligation presupposes that the shareholder has some form of constructive ownership interest in the company’s activities and earnings. If the shareholder truly has no connection to the company’s underlying operations, on what basis would purification be required?
Part Three: What the Tradition Actually Requires
The Shariah principle governing Zakat on wealth is that it applies to assets over which the owner has milk tamm and which are of a zakatable type. Within that, the tradition has always distinguished between growth-generating wealth (amwal naami’ah) and productive tools (alat al-san’ah). The tools that generate wealth are exempt. The wealth they generate is not.
This principle is the operating framework across the madhahib. The passive investor is not a trader. The passive investor is a participant in a going concern. Their Zakat obligation attaches to their proportional share of the company’s zakatable wealth, not to the market price of their participation right, which includes the value of exempt assets, speculative premiums, and market sentiment.
The CRI methodology preserves this entire framework. It maintains the shareholder’s constructive interest in the company’s holdings. It honors the classical exemption of productive assets. It applies the same principle to the corporate context that has always applied to the sole proprietor and the partner: identify the zakatable components, exempt the non-zakatable components, pay on what remains.
Conclusion
The author’s proposal to assess Zakat on the full market value of shares is not a return to the tradition. It is a departure from it. It collapses the distinction between productive assets and zakatable wealth that the tradition has maintained since the time of the Companions. It imposes Zakat on buildings, equipment, patents, and brand equity that no classical scholar has ever considered zakatable.
The CRI methodology is not a "70% haircut" on charitable obligations. It is the only methodology that maintains internal coherence with the classical Zakat framework while applying it to the modern corporate form.
The shoemaker does not pay Zakat on his hammer. He never has. The principle has not changed because the workshop became a corporation.
Joe Bradford is the author of Simple Zakat Guide (2015, 3rd ed. 2024), founder of simplezakatguide.com.