Qitzur Shulchan Arukh – 66:9

ט: אִם הַנּוֹתֵן רוֹצֶה שֶׁהַמְקַבֵּל יִתֵן לוֹ שְׁטַר-חוֹב פָּשׁוּט וְאַמִּיץ, כְּחָק- הַמְּדִינָה, בִּכְדֵי שֶׁאִם הַמְקַבֵּל יְסָרֵב מִלִּפְרוֹעַ אוֹ יָמוּת, יְהֵא לוֹ נָקֵל לִגְבּוֹת מְעוֹתָיו עַל יְדֵי עֶרְכָּאוֹת, אֶלָּא שֶׁבְּעַל פֶּה הֵם מַתְנִים שֶׁמָּעוֹת אֵלּוּ הֵן בְּתוֹרַת עִסְקָא, לֹא מַהֲנֵי, וַאֲפִלּוּ הַשְּׁטָר אֵינוֹ אֶלָּא עַל הַקֶּרֶן לְבָד, דְּכֵיוָן שֶׁהַנּוֹתֵן יָכוֹל לִגְבּוֹת כָּל הַמָּעוֹת בִּשְׁטַר- חוֹב שֶׁבְּיָדוֹ אֲפִלּוּ אִם יִהְיֶה הֶפְסֵד בָּרוּר, אָסוּר. וַאֲפִלּוּ אִם הַמְקַבֵּל מַאֲמִין לְהַנּוֹתֵן וְהוּא אָדָם חָסִיד, מִכָּל מָקוֹם לֹא מַהֲנֵי. וַאֲפִלּו אִם הַמְקַבֵּל נוֹתֵן לְהַנּוֹתֵן גַּם שְׁטַר -עִסְקָא, שֶׁכָּתוּב בּוֹ כִּי הַמָּעוֹת שֶׁנּכְתְּבוּ בַּשְּׁטַר- חוֹב הֵן בְּתוֹרַת עִסְקָא, גַּם כֵּן לֹא מַהֲנֵי, דְּאִכָּא לְמֵיחָשׁ שֶׁמָּא הַנּוֹתֵן אוֹ יוֹרְשָׁיו יַעֲלִימוּ אַחַר כָּךְ אֶת שְּׁטַר- הָעִסְקָא וְיִגְבּוּ בִּשְׁטַר- חוֹב. וְאֵין הֶתֵּר לָזֶה, אֶלָּא שֶׁיַּשְׁלִישׁוּ אֶת שְּׁטַר- הָעִסְקָא בְּיַד שָׁלִישׁ, אוֹ שֶׁהַנּוֹתֵן יַחְתֹּם אֶת עַצְמוֹ עַל שְּׁטַר- הָעִסְקָא וִיהֵא מֻנָּח בְּיַד הַמְקַבֵּל, אוֹ שֶׁיִּכְתְּבוּ עַל שְּׁטַר-הַ חוֹב, שֶׁהוּא עַל פִּי אֹפֶן הַמְבֹאָר בִּשְׁטַר- עִסְקָא, אוֹ לְכָל הַפָּחוֹת יְיַחֲדוּ עֵדִים שֶׁשְּׁטַר-הַ חוֹב הוּא בְּתוֹרַת עִסְקָא. וּבְכָל אֳפַנִים אֵלּוּ, אֲפִלּוּ אִם נִכְלַל בִּשְׁטַר-הַ חוֹב הַקּרֶן עִם הָרֶוַח, שַׁפִּיר דָּמֵי – סימן קס”ז קע”ז ובחכמת אדם

If the investor wants the recipient to give him a simple debt contract [IOU] that is binding by civil law so that if the recipient refuses to pay or dies, it will be easier for him to collect his money by means of the [secular] courts [- he may]. If, however,  they agreed verbally that the money comes under the laws of a [halachically permissible] business agreement, it is not valid. Even if the contract is only on the principal, since the investor can collect all the money using the IOU that he holds even if the investment has clearly lost, it is forbidden. Even if the investor is trusted by the recipient and he is a pious man, in any event it is not valid. Even if the recipient also gives to the investor a [halachically valid] business agreement, in which is written that the money that is mentioned in the promissory note is under the laws of a business agreement, that also is not valid, because there is reason to suspect that the investor or his heirs might afterward hide the business agreement and collect on the IOU.

There is no way to do this permissibly unless [either]:

  1. they pass on the business agreement to a third party [who would produce it only if the investment loses money and the investor tries to collect the full amount];  or
  2. the investor will himself sign on the business agreement and it remains under the control of the recipient; or
  3. they will write in the IOU that it is according to the terms described in the business agreement; or,
  4. at the very least, the witnesses will be told that the promissory note is subject to a business agreement.

With all these (different) methods (described above), even if there is included in the IOU, the principal and the profit, this is allowed.

A civil promissory note would frame the deal as a loan unless there was some way to insure that the investor is forced to accept his share of any loss.

This again ties back to the notion that control is associated with who absorbs the risk, and therefore if the funder has no risk, the money is entirely in the control of the recipient, and it’s a loan which converts any profit into interest.

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