After spending some time studying the effect of corporate division upon the juristic person from various angles I have come to the conclusion that corporate division does NOT produce a multiplicity of the juristic person.
In the case of Absa Islamic Banking this would mean that there would be no sharʿī separation between Absa Group and AIB. Indeed, AIB does certainly constitute a separately managed and mandated pool within the Group, but not to the extent that it gains a separate legal identity.
The most important ramification of this position pertains to MFTP. Since there is only one legal entity, MFTP, when seen simply as excess on funds loaned between divisions, does not constitute ribā. The loan would thus be deemed a loan from an entity, to the same entity—or in truth, no loan at all. In this depiction of MFTP I have only looked at the character imparted to MFTP by the inter-departmental loan. The manner in which MFTP funds were originally generated by the Group can still impart a different character to these funds.
The reasons for the above conclusion are set out below.
The creation of a juristic persona is an artificial process that may well be described as going against the natural grain of law. It is for this reason that it is sometimes described as a legal fiction, a fictitious person or persona ficta. As such it does not come into being automatically, but requires the following of a set procedure to be legally recognized.
In South African law there are three ways in which legal personality is acquired. These are:
(a) through a separate act, such as the acts that created ISCOR and ESKOM;
(b) through a general enabling act, such as the Companies Act no. 61 of 1973 or the Banks Act no. 23 of 1965
(c) through conduct, which means that an association may acquire legal personality through conducting itself as a legal person.
This last method, however, applies solely to associations that do not pursue the acquisition of gain. Associations that have gain as its objective are regulated by section 31 of the Companies Act which enforces registration under the Companies Act or formation in pursuance of some other law (Cilliers and Benade, Company Law, p. 6, Butterworths 4th ed.).
We also have in South African law ample evidence of courts disregarding the separate existence of a properly registered legal entity, or as it is termed, “piercing the corporate veil.” Cilliers and Benade (Company Law p. 15, Butterworths 4th ed.) suggest a number of factors which courts must consider before considering separate legal entities as one “economic entity.” (They state their use of the term “economic entity” to be “because the different holding and subsidiary companies, although independent, are regarded as part of the economic unit represented by the constituent group companies.”) Of the four factors which they state, the following two are of interest:
“a) If the necessary degree of control, which will always be a question of fact, is present. If for eg the relationship between the companies in the group is that of a holding company and wholly owned subsidiary it can be indicative of the necessary degree of control. Control will in reality have to be exercised in such a manner that the subsidiary is completely subservient to the holding company.
(b) If as far as is relevant there is an “utter identity and community of interest” between the holding and subsidiary company in the group.”
To the above I must add the implications of taxation. I gather from Ahmed that the Group is taxed as a single unit. That gives end indication of SARS’ position. As for the attitude of the courts, Cilliers and Benade (p. 14) state that “[a]s far as the tax liability of a company is concerned the courts will not permit the true state of affairs to be concealed by the provisions in the company documents.”
Now, all of the above very obviously pertains to South African law and not to Sharīʿah. I have approached the matter from this angle for a very pertinent reason, however. The argument which I seek to build here is of the a fortiori or awlawī type. With a broad understanding of the state of South African law in place, the next step in my argument would be a comparison of South African law and Sharīʿah on this issue.
In South African law juristic personality is a well-entrenched concept with a wide and considerably liberal usage. In Sharīʿah, on the other hand, the very existence of juristic personality for entities other than natural persons is a matter of dispute. It is therefore quite probable that there will be greater restriction upon the scope of its recognition in Sharīʿah as compared to South African law. Having seen the limitations imposed by South African law upon juristic personality, I can only conclude that under Sharīʿah we would have either very similar, or much more restrictive limitations.
Finally, in response to the possible question as to why I would resort to probability under Sharīʿah, as opposed to actuality, I submit that in the matter of juristic personality our fiqh literature is comparatively underdeveloped. While the embryonic roots of concept are most certainly traceable in our classical fiqh, the extent to which it has been applied and developed in the contemporary world has been unprecedented. We are therefore left at a juncture from where we have to take a number of updating leaps, an example of which is my present effort.