Project Fellow Weekly - Issue 221
WHAT'S THE LAW
◆
Encouraging intelligent and entertaining debate at your Shabbat table.
Fellow Weekly raises issues of business law and ethics through lively emails by featuring your real-life scenarios answered by our leading authorities and professionals.
|
|
About Project Fellow
. Your Donation will help us publish our works and share this Torah with others.
Tax ID # 26-1963112
click here for this week's PDF
|
Debts and Shmitta
"At the end of seven years (the end of the Shmitta year) you shall institute a 'release'. This is the matter of the 'release': Every creditor shall release his authority over what he has lent his fellow or his brother, for he has proclaimed a release for Hashem" [Deuteronomy 15:1,2]. In other words at the end of the Shmitta year, a creditor must absolve his/her debtors from repaying the loan.
Some questions:
- Does this mandate include loans which are due after the end of Shmitta?
- Are loans automatically annulled or is it necessary for the lender to do so?
- Need a proprietor annul the debts of customers who purchased merchandise on credit?
- What is the status of due rent money and/or delinquent bills for services rendered?
- Does Shmitta interfere with a Halachic Warranted Investments (see Issue 220 and below) whereby the invested could be absolved from returning to the investor a percentage of the investment he/she would otherwise be required to return?
What is the Law?
-
Halachically Warranted Investments
How an investor can earn dividends without encountering ribbis:
Unless otherwise stipulated, Chazal view an investment, where one party provides the funds (investor) and the second party (invested) actively runs the business as a 50% loan: 50% deposit [Y.D. 177: 2]. (Note: Although 50% is deemed a loan, nevertheless, the entire sum must be used for the investment purposes strictly in accordance with the contractual agreement [Y.D. 177: 30].)
Liability: This means that the invested is fully liable for 50% loan even if it is lost due to an unforeseen mishap. The degree of liability for the 50% deposit is shared between the investor and invested. That is, the invested assumes liability for losses due to negligence and the investor assumes liability for losses due to unforeseen mishap. [Y.D. 177: 2]
Returns: In terms of splitting the dividends; the invested keeps the money generated from the 50% loan and the investor keeps the money generated from the 50% deposit. As noted above, one may earn dividends off of a deposit [See below].
Service Charge: Although, one may earn dividends from a deposit, but a lender may not receive a free or discounted service from the debtor for having advanced the debtor a loan. For the invested to actively invest the 50% deposit on behalf of the investor without receiving compensation for his services, in return for receiving the 50% loan, constitutes ribbis.
Therefore, to ensure that the arrangement does not constitute ribbis, it is imperative for the investor to arrange to compensate the invested for providing the investing services.
|
Partnerships vs. Investments
Daniel and Ben partnered to sell camera accessories online. Daniel invested $60,000 into the business while Ben invested $40,000 in to the business. Ben is the active partner.
In addition to dividing the returns 60/40, May Daniel demand that the first $5,000 of profits?
Must Daniel compensate Ben for his services?
|
The Answer
Daniel may demand the first 5,000 of profits.
Daniel need not compensate David for his services.
|
|
Detailed Explanation
Buick or Photography invokes the following Halachos:
When both parties invest their own money in a venture, no loan transpired and there is no need to compensate the active partner for the rendered services [Y.D. 177:3 Rema].
Additionally the two may divide the returns in any manner they wish and need not concern themselves with ribbis issues [Sha"ch 13].
|
|
|
|
|
|
|
Note:
Although we aim to present the correct ruling, varying details are always important and decisively influence every individual case. Our readers are thus encouraged to present their personal cases to a competent authority and not solely rely on the information provided.
Together...for a better world
You can help build a better world. Just invite your friends and family to subscribe to
Fellow Weekly.
To join this mailing list, please click here
or send an email to weekly@projectfellow.org with the word subscribe in the subject line
CLICK HERE to DONATE to PROJECT FELLOW TODAY!
|
|
A project of
Yesharim Foundation for Ethical Law
105/21 Sanhedria Murchevet, Jerusalem
ISRAEL 02-581-6337
USA 845-335-5516 |
|
