Corporations and Partnerships with Respect to Ribbit: Difference between revisions
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# If someone gives his worker money and says that half is considered a loan and half an investment that is considered an iska and is forbidden without any other solutions. The half loan can be used by the worker for his own investment but it is completely his responsibility to repay the capital. The half investment is not to be used by the worker for his personal needs, is in the domain of the borrower, and whatever it gains or loses goes to the owner. This is a classic ''iska'', which literally means investment.<ref>Shulchan Aruch Y.D. 177:2</ref> | # If someone gives his worker money and says that half is considered a loan and half an investment that is considered an iska and is forbidden without any other solutions. The half loan can be used by the worker for his own investment but it is completely his responsibility to repay the capital. The half investment is not to be used by the worker for his personal needs, is in the domain of the borrower, and whatever it gains or loses goes to the owner. This is a classic ''iska'', which literally means investment.<ref>Shulchan Aruch Y.D. 177:2</ref> | ||
## For example, if a person gives the worker $100 for an iska. The worker invests all of the money and makes $10 profit. In a classic iska, the worker and owner would split the profits and the worker would return $105. Let's say that the worker invested and lost $10. In the iska arrangement, the worker and owner would again split the losses and the worker would return $95. This arrangement is forbidden without any other solutions.<ref>Shulchan Aruch Y.D. 177:2</ref> | ## For example, if a person gives the worker $100 for an iska. The worker invests all of the money and makes $10 profit. In a classic iska, the worker and owner would split the profits and the worker would return $105. Let's say that the worker invested and lost $10. In the iska arrangement, the worker and owner would again split the losses and the worker would return $95. This arrangement is forbidden without any other solutions.<ref>Shulchan Aruch Y.D. 177:2</ref> | ||
===Alternate Versions of Iska=== | |||
====Capping Profits==== | |||
# If an iska is otherwise set up correctly with half of it a loan and half investment and there's a wage paid to the agent, then it is permissible to fix a cap of return profit that the agent would have to give and if he made more he can keep it.<ref>Taz 177:12</ref> | |||
# It is permitted to arrange that if the agent makes any profit he needs to pay a certain fixed amount to the investor, if the agent doesn't make profit he is exempt, and if he loses then the agent and the investor split the loses.<ref>Taz 177:12</ref> | |||
====All Profits to Agent==== | |||
# It is impermissible to have all of the profits of the investment to accrue to the agent for a fixed fee that the agent pays the investor. Doing so is finding a loophole in the laws of interest and forbidden.<ref>Taz 177:12 in explaining Shulchan Aruch 177:6, Chelkat Binyamin 177:91</ref> | |||
# It is forbidden to stipulate that the gains and losses accrue to the agent and the agent owes a fixed amount to the investor. This is considered taking interest even if the investor accepts the responsibility for if it is lost, stolen, or an unexpected circumstance.<Ref>Chelkat Binyamin 177:91 based on Prisha and Bach in explaining Shulchan Aruch 177:6, Rama 177:6. Even though Shach 177:20 is lenient, Chelkat Binyamin 177:98 rules against him.</ref> | |||
====All Profits to Investor==== | |||
# It is permitted for the investor to make all of the profits of an iska if he pays for the wages and additionally pays the agent an extra fixed income to offset the profits he is acquiring from the agent. It is permitted since there is an element of risk as the investor doesn't know how much profit will be made if at all.<ref>Taz 177:12</ref> | |||
# If someone is doing an investment<ref>Chelkat Binyamin 177:19 writes that although the discussion of Rama 177:1 is about property it can also apply to money.</ref> entirely for the benefit of the investor and doesn't take any profits from the investments or has other benefits, he is considered an agent of the investor and not a borrower. In such a case it is permitted even for the agent to accept responsibility for the investment that if it depreciates that he will nonetheless return the capital since he is merely a guard with a lot of responsibility and not a borrower.<ref>Sh"t Ran 73 cites the Chachmei Lunil who said that if an investor has an agent invest his money and all the profits go to the investor, then the agent isn't considered a borrower. If so, he can take responsibility for the capital. He quotes that originally the Raavad argued with this leniency but seems to have retracted later. In the Ran himself he says that the agent can even be paid for his work. The Rama 177:1 cites this leniency as the halacha. Based on the Yerushalmi b"m 5:3 the Gra 177:5 supports this Rama but limits it to where the investor doesn't benefit. Chelkat Binyamin 177:16 writes that we are only lenient with this leniency if the borrower gains no benefit from the investment. That is, he isn't gaining a better reputation or is interested in getting another investment in the future with which he can make profits for himself. If he is gaining then he isn't an agent but rather a borrower since he is doing it for himself partially. In the Biurim he cites the Tiferet Lmoshe 170:2 who holds that even if there's any tangential benefit that the agent gains it is forbidden as we see from the case of a guarantor who doesn't personally gain from the loan but may not pay interest (S"A CM 170:1). Chelkat Binyamin disagrees.</ref> | |||
====Iska for Commodities==== | |||
# If someone takes a job to improve and sell the merchandise or livestock of someone else and he accepts all responsibility of its losses and also agrees to pay its original price if it is destroyed or dies that is forbidden as interest. Even though the worker gains from a percent of the profits of the merchandise or livestock the deal is considered to have more potential for the owner to gain than lose (''karov lsachar vrachok mhefsed''). The only reason that the worker would accept such a deal is because the owner is extending him a loan, the commodity, through which the worker can gain.<ref>Gemara Bava Metsia 68a, 70b, Rashi 68a s.v. ein, Shulchan Aruch Y.D. 177:1</ref> | |||
===How to Permit an Iska=== | ===How to Permit an Iska=== | ||
# This can be remedied by either making it a favorable deal for the worker or by paying him. To make the deal favorable for the worker that would mean making it such that there is a greater percentage of gains that the worker makes than the percent of losses he assumes.<ref>Shulchan Aruch Y.D. 177:2-3</ref> | # This can be remedied by either making it a favorable deal for the worker or by paying him. To make the deal favorable for the worker that would mean making it such that there is a greater percentage of gains that the worker makes than the percent of losses he assumes.<ref>Shulchan Aruch Y.D. 177:2-3</ref> | ||
# In the above example, if the worker was given a stipulation under which he would keep 2/3 of the gains and only assumed 1/2 of the losses, then it would be permitted. So, when he gained $10 he would return $103.3 and when he would lose $10 he would return $95. Alternatively, they could have arranged that the worker would keep 1/2 of the gains and only assume 1/3 of the losses. For our example, when the worker would gain $10 he would have to return $105 but in the case of a $10 he would return $93.3.<ref>Gemara Bava Metsia 68b-69a</ref> We hold that this arrangement is effective with any percentages as long as the amount that the worker stands to gain is greater than the amount he stands to lose.<ref>These stipulations are those of the Gemara Bava Metsia 68b as understood by the Raavad Sheluchin 6:3, Tur 177:4, Shach 177:14, Taz 177:8, and Chelkat Binyamin 177:70. This can be followed even if not stipulated in advance. However, once it is stipulated in advance it is sufficient to give the worker even a small increase (Shulchan Aruch 177:3, Chelkat Binyamin 177:162).</ref> | # In the above example, if the worker was given a stipulation under which he would keep 2/3 of the gains and only assumed 1/2 of the losses, then it would be permitted. So, when he gained $10 he would return $103.3 and when he would lose $10 he would return $95. Alternatively, they could have arranged that the worker would keep 1/2 of the gains and only assume 1/3 of the losses. For our example, when the worker would gain $10 he would have to return $105 but in the case of a $10 he would return $93.3.<ref>Gemara Bava Metsia 68b-69a</ref> We hold that this arrangement is effective with any percentages as long as the amount that the worker stands to gain is greater than the amount he stands to lose.<ref>These stipulations are those of the Gemara Bava Metsia 68b as understood by the Raavad Sheluchin 6:3, Tur 177:4, Shach 177:14, Taz 177:8, and Chelkat Binyamin 177:70. This can be followed even if not stipulated in advance. However, once it is stipulated in advance it is sufficient to give the worker even a small increase (Shulchan Aruch 177:3, Chelkat Binyamin 177:162).</ref> | ||
====Wages for an Iska Worker==== | ====Wages for an Iska Worker==== | ||
# If they stipulate in advance it is sufficient to pay the iska agent a small wage.<ref>Shulchan Aruch Y.D. 177:3</ref> Some hold that any amount above a [[pruta]] is sufficient, while others hold that it is a [[dinar]], which is closer to $3.<ref>Chelkat Binyamin 177:55 cits that the Birkei Yosef holds that a dinar is necessary while the Prisha, Bet Meir, and Chavot Daat think that it could be less than a dinar.</ref> Some say that it must be an amount that is recognizably a wage and not a token payment.<ref>Bet Yosef 177:2 citing Smag, Chelkat Binyamin 177:55 citing Darkei Teshuva from Bet Dovid</ref> The common practice is to give $1.<ref>Igrot Moshe 3:39, Chelkat Binyamin 177:55, [http://bethdin.org/wp-content/uploads/2015/07/ShtarIska.pdf Heter Iska of the Bet Din of America], [https://www.star-k.org/images/db//hetter-iska.pdf Heter Iska of Star-K]</ref> | # If they stipulate in advance it is sufficient to pay the iska agent a small wage.<ref>Shulchan Aruch Y.D. 177:3</ref> Some hold that any amount above a [[pruta]] is sufficient, while others hold that it is a [[dinar]], which is closer to $3.<ref>Chelkat Binyamin 177:55 cits that the Birkei Yosef holds that a dinar is necessary while the Prisha, Bet Meir, and Chavot Daat think that it could be less than a dinar.</ref> Some say that it must be an amount that is recognizably a wage and not a token payment.<ref>Bet Yosef 177:2 citing Smag, Chelkat Binyamin 177:55 citing Darkei Teshuva from Bet Dovid</ref> The common practice is to give $1.<ref>Igrot Moshe 3:39, Chelkat Binyamin 177:55, [http://bethdin.org/wp-content/uploads/2015/07/ShtarIska.pdf Heter Iska of the Bet Din of America], [https://www.star-k.org/images/db//hetter-iska.pdf Heter Iska of Star-K]</ref> | ||
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# Poel batel's wage is defined as asking that the person would take as a salary not to have to work at all. This price would vary depending on their job.<ref>Chelkat Binyamin 177:31 and Milvah Hashem 2:12:4 follow the opinion of Tosfot either because Shulchan Aruch didn't clarify and we can be lenient since it is only rabbinic or because it is the simplest explanation in the words of Shulchan Aruch and the Bet Yosef elaborated upon that opinion. Chavot Daat 177:3 also holds that opinion.</ref> | # Poel batel's wage is defined as asking that the person would take as a salary not to have to work at all. This price would vary depending on their job.<ref>Chelkat Binyamin 177:31 and Milvah Hashem 2:12:4 follow the opinion of Tosfot either because Shulchan Aruch didn't clarify and we can be lenient since it is only rabbinic or because it is the simplest explanation in the words of Shulchan Aruch and the Bet Yosef elaborated upon that opinion. Chavot Daat 177:3 also holds that opinion.</ref> | ||
===Terms of the Iska=== | ===Terms and Conditions of the Iska=== | ||
====Obligation of the Agent to Watch the Money==== | |||
# The agent investing the money on behalf of the investor is considered a paid watchman ([[shomer]]) since he is being paid for his work.<ref>Shulchan Aruch Y.D. 177:5</ref> | # The agent investing the money on behalf of the investor is considered a paid watchman ([[shomer]]) since he is being paid for his work.<ref>Shulchan Aruch Y.D. 177:5</ref> | ||
====If the Agent Breaks the Stipulations==== | |||
# It is permitted to create whatever conditions the investor would like upon the agent and if the agent doesn't follow those conditions then the agent takes responsibility for all of the losses and the gains continue to be split as before. Indeed it is permitted for the gent to not follow these conditions.<ref>Rama Y.D. 177:5. It isn't considered as though the agent stole the money since he is doing so for the benefit of the investor (Shulchan Aruch Y.D. 177:5, Taz 177:10). </ref> It isn't considered more beneficial to the investor (''karov lsachar vrachok mhefsed'') since he can only gain and not lose because the original made it possible that it would been a regular iska.<ref>Shulchan Aruch Y.D. 177:5. Shach 177:17 clarifies that this is only permitted since an iska is only rabbinic interest to begin with.</ref> | # It is permitted to create whatever conditions the investor would like upon the agent and if the agent doesn't follow those conditions then the agent takes responsibility for all of the losses and the gains continue to be split as before. Indeed it is permitted for the gent to not follow these conditions.<ref>Rama Y.D. 177:5. It isn't considered as though the agent stole the money since he is doing so for the benefit of the investor (Shulchan Aruch Y.D. 177:5, Taz 177:10). </ref> It isn't considered more beneficial to the investor (''karov lsachar vrachok mhefsed'') since he can only gain and not lose because the original made it possible that it would been a regular iska.<ref>Shulchan Aruch Y.D. 177:5. Shach 177:17 clarifies that this is only permitted since an iska is only rabbinic interest to begin with.</ref> | ||
## If the agent explicitly states that he is [[steal]]ing the funds for himself,<ref>Taz 177:11 notes that it is only effective if the agent states that he is stealing it at the time that he used it for himself, however, afterwards he isn't trusted to say he stole it as opposed to merely used it for the benefit of the investor against the conditions of the investor. Although Nekudat Hakesef 177:5 disagrees the Bear Heitiv 177:12 points out that this Nekudat Kesef is very difficult to understand. Chelkat Binyamin 177:83 agrees with Taz.</ref> then all the loses and gains accrue to the agent and not the investor. To avoid this it is advisable to stipulate that if the agent steals the money for himself then he must repay it to the investment. Thereby all profits will continue to accrue to the investor. If the practice is allow the agent to take money for himself and repay it then it isn't necessary to make such a stipulation explicit.<ref>Rama Y.D. 177:5</ref> | ## If the agent explicitly states that he is [[steal]]ing the funds for himself,<ref>Taz 177:11 notes that it is only effective if the agent states that he is stealing it at the time that he used it for himself, however, afterwards he isn't trusted to say he stole it as opposed to merely used it for the benefit of the investor against the conditions of the investor. Although Nekudat Hakesef 177:5 disagrees the Bear Heitiv 177:12 points out that this Nekudat Kesef is very difficult to understand. Chelkat Binyamin 177:83 agrees with Taz.</ref> then all the loses and gains accrue to the agent and not the investor. To avoid this it is advisable to stipulate that if the agent steals the money for himself then he must repay it to the investment. Thereby all profits will continue to accrue to the investor. If the practice is allow the agent to take money for himself and repay it then it isn't necessary to make such a stipulation explicit.<ref>Rama Y.D. 177:5</ref> | ||
= | ====Iska Agreements that were Changed into a Loan==== | ||
===Iska Agreements that were Changed into | |||
# An iska agreement that was renegotiated to be a loan with interest obviously is forbidden.<ref>Taz 177:14 points out that whether this is Biblical or rabbinic interest depends on the dispute in Shulchan Aruch 166:2.</ref> However, if the event that the agent continues to invest the money and indeed made the profits that were stipulated by the original iska, after the fact it can be considered as though they continued a permitted iska and the money doesn't need to be returned.<ref>Shulchan Aruch 177:7</ref> | # An iska agreement that was renegotiated to be a loan with interest obviously is forbidden.<ref>Taz 177:14 points out that whether this is Biblical or rabbinic interest depends on the dispute in Shulchan Aruch 166:2.</ref> However, if the event that the agent continues to invest the money and indeed made the profits that were stipulated by the original iska, after the fact it can be considered as though they continued a permitted iska and the money doesn't need to be returned.<ref>Shulchan Aruch 177:7</ref> | ||
# In this case if the investor claims that the agent made more profits he can't force the agent to swear.<ref>Shach 177:23, Chelkat Binyamin 177:111. See there for the discussion of the possibility of making the agent swear with a cherem and also the Dagul Mirvava's claim that there would be an obligation to swear because of the joint partnership (see C.M. 93:4).</ref> | # In this case if the investor claims that the agent made more profits he can't force the agent to swear.<ref>Shach 177:23, Chelkat Binyamin 177:111. See there for the discussion of the possibility of making the agent swear with a cherem and also the Dagul Mirvava's claim that there would be an obligation to swear because of the joint partnership (see C.M. 93:4).</ref> | ||
# If the agent claims that the money he already paid to the investor was interest and it should be returned, the investor is believed without swearing to say that he accepted it as iska payments because such payment were due to him according to the original iska as there were indeed specified profits and it was not interest.<ref>Shach 177:23, Chelkat Binyamin 177:111</ref> | # If the agent claims that the money he already paid to the investor was interest and it should be returned, the investor is believed without swearing to say that he accepted it as iska payments because such payment were due to him according to the original iska as there were indeed specified profits and it was not interest.<ref>Shach 177:23, Chelkat Binyamin 177:111</ref> | ||
===Rolling Over a Iska Upon its | ====Rolling Over a Iska Upon its Maturity==== | ||
# Many poskim hold that upon maturity date of the iska if the investor and agent don't stipulate what to do or actually return the money, it is considered to be assumed that the same iska setup will continue. In other words, the first iska rolls over into another iska unless otherwise stipulated.<ref>Taz 177:14, Chelkat Binyamin 177:112. This is regarding a regular iska with part loan and part investment. In Chelkat Binyamin (Biurim s.v. muter p. 650) he quotes a dispute between the Isrei Esh 56 and Bet Yitzchak 2:7 whether a heter iska of the Maharam would rollover to another iska. However, that was specifically because the arrangement was such that there was a period of investment and then a period of loan and the dispute was whether it would automatically rollover to another deal with the same conditions.</ref> | # Many poskim hold that upon maturity date of the iska if the investor and agent don't stipulate what to do or actually return the money, it is considered to be assumed that the same iska setup will continue. In other words, the first iska rolls over into another iska unless otherwise stipulated.<ref>Taz 177:14, Chelkat Binyamin 177:112. This is regarding a regular iska with part loan and part investment. In Chelkat Binyamin (Biurim s.v. muter p. 650) he quotes a dispute between the Isrei Esh 56 and Bet Yitzchak 2:7 whether a heter iska of the Maharam would rollover to another iska. However, that was specifically because the arrangement was such that there was a period of investment and then a period of loan and the dispute was whether it would automatically rollover to another deal with the same conditions.</ref> | ||
==Sources== | ==Sources== | ||
<references/> | <references/> | ||
[[Category:Ribbit]] | [[Category:Ribbit]] | ||
