Acharei Mos: Corporations in Halacha

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The Journal of Talmudic Law & Finance


~ SPECIAL PESACH EDITION ~

Corporations in Halacha 

 

Aside from the prohibition against consuming or having pleasure from Chametz on Pesach, the Torah prohibits us from even owning the Chametz during this holiday. In addition, in order to strengthen this prohibition, the Rabbis instituted a law that any Chametz that is owned by a Jew over Pesach may not be enjoyed after Pesach. This opens up a myriad of Halachic concerns to the average Jewish consumer. Are we then not allowed to purchase Chametz items from companies which are Jewish but do not observe the laws of Pesach? How about a publically traded company? Does the ownership of minority shareholders constitute Halachic ownership? If I own stock in Nabisco or General Mills, Feature Audio Shiur: My Shares in General Millsmust I sell those shares prior to Pesach? How about Ribbis  

concerns or the fact that a company is open on Shabbos?

 

This week’s journal will focus on the Halachic status of a corporation and other legal entities.

  Click here for this week’s Featured Audio Shiur by Rav Yosef Greenwald:

My Pesach Shares in General Mills 

pp


Choshen Mishpat Chiddush

Mechiras Chometz 

 

As part of the obligation to rid ourselves of all chometz before Pesach it is customary to perform the mechiras chometz in which we appoint the local rabbi to sell our chometz to a non-Jew for Pesach. Although not widely known, a component of the mechiras chometz contract includes the sale of any chometz that might have adhered to the walls of our food utensils. It is unnecessary to sell the actual utensil itself or even to sell any chometz ‘taste’ that might be absorbed within the walls of the utensils, though some mechiras chometz contracts include the latter, as well. It is interesting to note that in the event that one mistakenly sold the actual utensils one might be obligated to immerse them into a mikva when one buys them back from the non-Jew at the conclusion of Pesach. As such, one should be sure never to include one’s utensils in the mechiras chometz procedure.

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Feature Article: Selling Chometz; A Complex Transaction


Selling Chometz: A Complex Transaction 

 

The Torah forbids a Jew, during Pesach, from either owning chometz or deriving benefit from his chometz. However, people often own chometz which they do not want to discard or burn. Over the generations, rabbanim have developed a mechanism – selling chometz to a gentile – to enable Jews to abide by these Torah laws without suffering a monetary loss.

 

The logic behind selling chometz is that when one sells his chometz to a gentile, he transfers ownership of the chometz and thereby avoids the Torah’s prohibitions. This article discusses the layman’s role in selling his chometz to a gentile.

 

Originally, Jews destroyed all their chometz before Pesach. But the Middle Ages saw the rise of Jewish-owned bakeries and breweries. As Pesach approached, these businesses were often left with large inventories of chometz so they avoided a financial loss by selling their chometz stock to a gentile and repossessing their chometz after Pesach. Over the following centuries, Jewish householders followed the example of these businessmen. They sold their chometz individually to a gentile. In fact, the Kitzur Shulchan Aruch, written in the 19th century, explains the procedure for a householder to sell his chometz directly to a gentile. The problem with this approach today is that most people do not know how to arrange a halachically valid transfer of ownership. Therefore, local rabbis arrange the sale of chometz for their communities. However, there is much confusion surrounding this sale.


In this Issue:

Related Article: 

E-Commerce on Shabbos & Yom Tov 

   

Featured Article: Selling Chometz: A Complex Transaction 

 

Related Article:  A Comprehensive Overview on Selling Chometz  

Selling Chometz

Selling Chometz 

By Rav Dovid Grossman 

Matzah Futures

Matzah Futures

By Rav Yaakov Rappaport 

The Pesach Gift that Wasn't

The Pesach Gift that Wasn’t

By Rav Yaakov Rappaport 


A common misconception is that the rabbi purchases the community’s chometz and resells it to a gentile. Actually, the rabbi does not purchase anyone’s chometz. He merely acts as an agent to sell the chometz.

 

One appoints the rabbi as his agent by performing two acts. First, he takes hold of an object (e.g. a pen or handkerchief), which belongs to the rabbi. Though not absolutely required, this act strengthens the relationship between the owner and his agent (the rabbi).

 

Second, he signs a document which formally appoints the rabbi to both sell the chometz and rent the place where the chometz is situated so that it will be located on the gentile’s “property.” One of the ways a gentile may acquire a Jew’s possessions is known as chotsair. That is, if the chometz resides in the gentile’s property and the Jew so desires, the gentile acquires the chometz.

 

One does not have to appoint the rabbi in person as his agent to sell chometz. A person may appoint the rabbi by mail, phone, fax, etc. It is very important for people to know that this sale is a formal sale. Once the chometz is sold to the gentile, it is totally owned by the gentile.

 

The seller must inform the rabbi of the location of the chometz so that he can, in turn, inform the gentile to enable his access to and use of the chometz. In case the seller will not be home for Pessach he should leave the key with a neighbor and record that information on the document that he signs with the rabbi.

 

Before Pesach, the gentile provides the rabbi with a down payment for the chometz. The gentile is not required to sell the chometz back to the Jew(s) when Pesach ends. Since the gentile owns the chometz, he is allowed to do with it as he pleases.

 

If, after Pesach, the gentile chooses to sell the chometz back to the Jews, the rabbi returns his down payment (with a payment for his “cooperation”). Originally, when people sold their chometz individually, many did not charge the gentile buyers the full market price for their chometz so some gentiles opted to retain ownership after Pesach and the Jews suffered financial losses. Today, the rabbi’s contract with the gentile states that, should the gentile choose to retain ownership of the chometz after the conclusion of Pesach, the chometz will be assessed within a few days and the gentile will be required to pay the assessed value upon presentation of the assessor’s report. The rabbi will credit the downpayment toward the full purchase price. Therefore, the gentile has no incentive to retain ownership at the conclusion of Pessach.

 

In an ordinary year, the rabbi sells the chometz to the gentile during the fifth hour of the morning (i.e. beween 4/12 and 5/12 of the daylight interval) of Erev Pesach, i.e. within the hour following the deadline for eating chometz. However, when Erev Pesach is Shabbos and Pesach starts on Saturday night, we have a problem because 1) we may eat chometz until the end of the fourth hour (4/12 of the daylight interval) on Shabbos Erev Pesach but 2) we may not sell on Shabbos.

 

A number of solutions have been suggested. The simplest is to retain ownership of the chometz one plans to eat on Shabbos Erev Pesach. When the Jew appoints the rabbi, he must specifically exclude the chometz that he intends to use on Shabbos and specify where it will be. For example, he may write on the contract that he is authorizing the rabbi to sell all his chometz except for “the rolls in the white plastic bag on the porch.” On Shabbos, he will not be permitted to consider any unfinished chometz to be included with what he is selling to the gentile because he explicitly excluded that chometz from the sale. Therefore, if he does not consume all the reserved chometz before the deadline for eating chometz, he must dispose of the remainder properly. There are various methods of destroying chometz on Shabbos. Ask the rabbi which method he prefers. A simple disposal procedure is to crumble the remaining chometz and flush it down the toilet.

 

After Pesach, before one uses the chometz that was sold, he should check that his rabbi has repurchased it from the gentile.

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Related ArticleA Comprehensive Overveiw on Selling Chometz

 

By Rav Yirmiyahu Kaganoff Shlit”a

 

Thirty days before Pesach, we begin studying its many and complicated laws. In that “spirit,” I send you this article.

 

As we all know, a Jew may not own chometz on Pesach, which is included in the Torah’s double prohibition, bal yira’eh and bal yimatzei. Furthermore, the Torah commanded us with a mitzvas aseh, a positive mitzvah, to destroy any chometz left in our possession after midday on Erev Pesach.

 

According to most poskim, these prohibitions apply both to chometz gamur (pure chometz) and to ta’aroves chometz (chometz mixed into another product). Furthermore, the Torah prohibited benefiting from chometz from midday on Erev Pesach regardless as to whether a Jew or a gentile owns it. Chazal prohibited benefiting from chometz an hour earlier. In addition, Chazal instituted a penalty whereby chometz owned by a Jew during Pesach may never be used. They also required us to search our homes and property the night before Pesach for chometz that we may have forgotten.

 

Although a Jew may not own chometz on Pesach, there is nothing wrong with his selling his chometz to a gentile before it becomes prohibited. The Mishnah (21a) states explicitly that one may sell chometz to a gentile before Pesach, although this meant that the gentile took the chometz home with him (see Terumas HaDeshen #120). Today when we sell our chometz, we leave it in our homes and we know that the gentile does not intend to use our chometz. Does this sale present us with any halachic issues to resolve?

 

REASONS TO ARRANGE MECHIRAS CHOMETZ

 

Before addressing these issues, we should note that there are several valid reasons to arrange a mechiras chometz even if one has no chometz of any value:

 

1. One is required to rid one’s house and all one’s possessions of chometz. However, some items, such as toasters, mixers, wooden kneading bowls, and flour bins are difficult, if not impossible, to clean. Shulchan Aruch and Rama (442:11) recommend giving wooden kneading bowls and flour bins and the chometz they contain as a gift to a non-Jew before Pesach, with the understanding that the gentile will return them after the holiday.  

 

However, if one does not have such a relationship with a gentile, or if it is inconvenient for the gentile to store these items in his house, one needs to modify the solution so that one does not possess chometz on Pesach. Thus, one can include this chometz and these appliances in the sale of chometz.

 

One should not sell items that require tevilas keilim (immersing vessels in a mikveh), such as metal or glass appliances, but rent them out instead, since otherwise one will have to immerse them again according to many poskim (Pischei Teshuvah, Yoreh Deah 120:13). Alternatively, one can simply sell the chometz that is attached or inside them, but not the appliances themselves.

 

2. Someone who owns stocks either directly or through mutual funds and/or retirement programs has another reason to arrange selling his chometz. Although some poskim contend that one may own stocks in a chometz business over Pesach (Rav Moshe Feinstein), most poskim prohibit owning shares on Pesach of a company that owns chometz. They contend that owning part of a corporation that owns chometz is considered as if I own chometz myself (Shu’t Minchas Yitzchok 3:1). Thus, in their opinion, even if someone’s house is completely chometz-free, he should arrange a mechiras chometz to include that which he owns as part of his shares.

 

3. The Mishnah Berurah mentions an additional reason to sell one’s chometz – to avoid searching for chometz (bedikas chometz) in areas that are difficult to check (433:23) or where one plans to store non-Pesach items (436:32). Many poskim contend that when using the sale to preempt bedikah, the sale should take affect prior to the time of bedikas chometz. This way, when the mitzvah of bedikah takes affect, these areas and their chometz are already under the control and ownership of the gentile.

 

4. Modern manufacturing creates an additional reason why one should arrange mechiras chometz, since it is difficult to ascertain whether medicines, vitamins, and cosmetic items such as colognes and mouthwashes contain chometz. For this reason, many people perform a standard mechiras chometz even if they destroy all their known chometz and search all the areas they own for chometz.

 

SOURCES FOR MECHIRAS CHOMETZ

 

The Mishnah (Pesachim 21a) and Gemara (Pesachim 13a) discuss selling chometz before Pesach in cases that one does not expect to receive the chometz back. In these instances, the sale is fairly easy to arrange: The gentile pays for the chometz (or receives it as a gift) and takes it home with him.

 

However, in instances where the Jew is expecting to receive the chometz back after Pesach, how does one guarantee that the chometz indeed becomes the property of the non-Jew? Does the Jew’s expectation that he will receive the chometz back undermine the sale? Also, does the gentile really intend to buy the chometz, or does he think that this is all make-believe and that he is not really purchasing it? This would, of course, undermine the purpose of the sale.

The Tosefta provides us with background to these questions:

 

A Jew is traveling by ship and has with him chometz that he needs to dispose of before Pesach. However, the Jew would like the chometz back after Pesach because there is a dearth of kosher food available. (Apparently, there was no hechsher on that particular ship.) The Jew may sell the chometz to the gentile before Pesach, and then purchase it back afterwards. Alternatively, the Jew may give the chometz to the gentile as a present, provided no conditions are attached. The gentile may then return the present after Pesach (Tosefta Pesachim 2:6). Thus we see that one may sell or give away chometz to a gentile and expect it back without violating any halachos provided the agreement does not require the gentile to give it back.

 

REMOVING THE CHOMETZ TO THE GENTILE’S PROPERTY

 

Terumas HaDeshen (#120) also discusses whether you may give your chometz to a gentile as a present that he intends to return to you after Pesach. He permits this, although he stipulates that the gentile must remove the chometz from the Jew’s house (as explained by Bach, Orach Chayim 448).

 

This condition presents us with a problem in arranging our mechiras chometz. The gentile is willing to cooperate and purchase our chometz, but he does not remove the chometz to his own house. Is there a way to alleviate this problem, or must we forgo selling chometz?

 

This problem became common when Jews became extensively involved in the ownership of taverns, which was in many places one of the few forms of livelihood open to them. It became common practice to sell the whiskey to a gentile before Pesach even though it remained in the Jew’s tavern (Bach, Orach Chayim Chapter 448). This procedure seems to violate the Terumas HaDeshen’s instructions.

 

Before we address this question, we must first analyze why the Terumas HaDeshen requires the removal of the chometz from the Jew’s premises.

 

The poskim present different reasons for this stipulation: In this article, I will present three such approaches. Some authorities suggest that leaving the chometz on the Jew’s property implies that the Jew assumes responsibility for the chometz even though he no longer owns it (Magen Avraham 448:4). The halacha prohibits a Jew from being responsible for a gentile’s chometz during Pesach (Gemara Pesachim 5b; Shulchan Aruch, Orach Chayim 440:1).

 

Others contend that the sold chometz should be removed from the Jew’s property out of concern that the Jew might eat it by mistake since it was once his (Shu’t Radbaz #240). The halacha is that if the Jew never owned the chometz, he may leave chometz owned by a gentile on his property as long as he places a very noticeable barrier around it (Gemara Pesachim 6a).

 

The poskim rule that transferring ownership of the area where the chometz is stored to the gentile satisfies both of these concerns (Bach 448). Thus, rather than moving the chometz onto the gentile’s property, we make the property holding the chometz into his property. Therefore, the contract selling the chometz also sells the area where the chometz is located.

 

If the Jew does not own the area holding the chometz but is renting it, he should rent the area to the non-Jew for Pesach rather than sell it. (To simplify matters, many Rabbonim simply rent areas to begin with, and do not sell the areas to a gentile.) Similarly, in Eretz Yisroel, where the Torah prohibited selling land to a gentile, one should rent his property to a gentile rather than sell it.

 

There is another approach to explain why the gentile should remove the chometz from the Jew’s property when he buys it. This opinion contends that in order to take possession of the chometz, the gentile must remove it into his property (Chok Yaakov, 448:14). This requires a bit of explanation.

 

WHAT MAKES A TRANSACTION VALID?

 

On a daily basis, we buy and sell items from merchants without paying attention when the item changes possession. – That is, at what point does the transaction become valid. Indeed for most of our daily activities, this question is not germane. I go to the supermarket to buy groceries. Does the item become mine when I pick it up to place it into my shopping cart, when I pay for it, or when I pick up the bag to leave the store? The vast majority of times it does not make a difference.

 

However, sometimes it makes a difference at what point the item becomes mine. If the item accidentally breaks after I paid for it, but before I picked up the bag, is it already mine or not? If the item is indeed already mine, I have no right to ask the merchant to replace it. It makes no difference whether it broke while I was at the store or after I brought it home – in either instance it is incorrect for me to assume that the merchant is responsible to compensate me. Indeed, although the merchant may be willing to replace the item, it is unclear that I may ask him to do so. The merchant may replace the item because he does not want to lose a customer, not because he has any obligation. Thus, this may qualify as coercing someone to give a present that he does not want to, something that is halachically prohibited and morally objectionable.

 

When selling chometz, it is of paramount importance to determine that the transaction has actually transpired. If the transaction has occurred, then the chometz now belongs to the gentile and there is no violation of bal yira’eh and bal yimatzei on Pesach. However, if the transaction has not taken affect, then the chometz still belongs to the Jew, who will violate bal yira’eh and bal yimatzei.  

 

HOW DOES THE CHOMETZ BECOME PROPERTY OF THE GENTILE?

 

An item changes ownership when there is an agreement between the parties that is subsequently followed by a maaseh kinyan, an act that transfers ownership. There are many types of maasei kinyan, each appropriate to some transactions and not to others.

 

Here is an example of an attempt to make a maaseh kinyan that does not work. Reuven wants to purchase a candy, and he decides to draw up a contract for the sale. This written contract does not transfer ownership of the candy to Reuven since it is not a recognized maaseh kinyan for transacting movable items. (Real estate is an example of an item for which a written contract is a maaseh kinyan.) On the other hand, the candy becomes Reuven’s property when he picks it up (assuming that the seller has agreed to the transaction and the two parties have agreed to a price) because this is a maaseh kinyan for movable items.

 

The poskim dispute what is the maaseh kinyan when purchasing movable items from a gentile, some contending that movable property becomes the buyer’s when he pays for it (Rashi, Bechoros 3b), others contending that it does not become his until he picks it up or takes physical possession in a similar way (Rabbeinu Tam, quoted by Tosafos, Avodah Zarah 71a). If it is a large or heavy item, then it becomes his when he pulls it or causes it to move in some other way, or when it is delivered to his property. Thus the chometz will not become property of the gentile until he takes physical possession.

 

This presents us with a practical problem. Since the gentile is not bringing the chometz home with him, nor is he picking it up, there is no maaseh kinyan taking place to transfer to him the ownership of the chometz according to Rabbeinu Tam.

 

Several poskim suggest alternative methods of carrying out the transaction (see Mishnah Berurah 448:17). In some of these methods, one rents to the gentile the places where the chometz is stored.

 

Since not all poskim accept this method of transacting chometz, we perform several such maasei kinyan in order to guarantee that the chometz indeed becomes the property of the gentile. This concern is one of the reasons why some people refrain from selling chometz gamur and only use the mechirah as a back-up measure. (See Tevuos Shor, Pesachim 21a for another reason why some people refrain from selling chometz gamur.)

 

We see that conducting a proper mechiras chometz is a complicated procedure, and certainly beyond the halachic skills of the typical layman. Thus, it is inadvisable for a lay person to arrange his own mechiras chometz without a rav’s supervision and advice.

 

A PRIVATELY ARRANGED SALE

 

In one of my previous positions, I was the only rav in the vicinity who was arranging mechiras chometz. One member of my shul, an attorney, had not approached me to arrange for the sale of his chometz, which I assumed was an oversight on his part. Wishing to avoid a crisis, I approached him diplomatically to ask whether he had forgotten to take care of mechiras chometz. He replied that he had arranged his own sale with a non-Jewish acquaintance of his, and had indeed drawn up the deed-of-sale himself.  

 

The attorney did not consult with me before he arranged this sale. In all likelihood, the contract he drew up was valid according to civil law, and therefore would be considered a valid mechirah according to some poskim (Masas Binyamin quoted by Magen Avraham 448:4). However, according to many poskim this attempt to sell chometz did not follow the rules that govern mechiras chometz (see Magen Avraham and Machatzis HaShekel). Thus, the attorney had violated bal yira’eh and bal yimatzei according to many opinions.

 

DIFFERENT TIME ZONES

 

Shimon is looking forward to his visit with his children in Eretz Yisroel for Pesach. He must make sure to mention this to his rav who is arranging his mechiras chometz. Since the sixth hour of Erev Pesach will arrive for Shimon in Eretz Yisroel many hours before it arrives for his rav in New York, Shimon’s chometz must be sold before the sixth hour of Erev Pesach in Eretz Yisroel, many hours earlier than if he were in America. The rav will make sure that the sale on Shimon’s chometz takes affect earlier than everyone else’s.

 

CAN I SELL CHOMETZ WITHOUT AUTHORIZATION?

 

Yosef stored a case of whiskey in my garage and then left for a lengthy vacation. He told me he would be back by Purim. A few days before Pesach, I notice that the whiskey is still in my garage, and I have not heard from Yosef, nor do I know how to reach him. What do I do with his whiskey? Can I arrange mechiras chometz on it without his explicit authorization?

 

Yehudah’s father, who lives in South Africa, is unfortunately no longer able to care for himself and suffers from dementia. Months ago, Yehudah moved his father into his own home in New York and closed up his father’s house for the time being. Now Yehudah realizes that he has no idea if his father owns any chometz in the house, or where it possibly might be. Can he authorize mechiras chometz on his father’s property without authorization?

 

The Gemara tells a story that impacts on these shaylos. Someone placed a large sack of chometz with a man named Yochanan the Sofer for safekeeping. On the morning of Erev Pesach, Yochanan went to ask Rebbe whether he should sell the chometz before it becomes prohibited. Rebbe ruled that Yochanan should wait to take action since the owner might still claim his property.

 

An hour later, Yochanan returned to ask the shaylah again and received the same reply. This happened hourly until the fifth hour, the last time at which he could sell the chometz, at which time Rebbe instructed him to sell the chometz to gentiles in the marketplace (Gemara Pesachim 13a).

There is a question that this Gemara does not address. How could Yochanan sell the chometz, if the owner had not authorized him?

 

The answer is that although the owner had not authorized Yochanan to sell the chometz, if it will become worthless, he should sell it as a favor for the owner. This is a form of hashavas aveidah, returning a lost object to its owner, since now he will receive some compensation for his chometz and otherwise it will become worthless (Mishnah Berurah 443:11). Similarly, both Yosef and Yehuda would be able to arrange mechiras chometz even though the owner had not authorized them (see Magen Avraham 443:4).

 

According to Kabbalah, searching for chometz is symbolic of searching within ourselves to locate and remove our own arrogant selves. As we go through the mitzvos of cleaning the house, searching, burning, and selling the chometz, we should also try to focus on the spiritual side of this search and destroy mission.

This was written by Rabbi Yirmiyahu Kaganoff Shlit”a and is being reprinted with his permission. To see more of his articles or for any questions you can visit his website http://rabbikaganoff.com/   

 To donate to Rabbi Kaganoff’s organization helping needy Jews in Eretz Yisroel please visit https://www.paypal.com/cgi-bin/webscr?cmd=_s-xclick&hosted_button_id=DXAGA7R

 

 

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