Mr. Krumbein began working for a national bakery chain last year. As part of his company’s ESOP (Employee Stock Ownership Plan), he acquired company stocks at the end of the year.
As Pesach approached, Mr. Krumbein wondered about his stocks. “I have stocks in my company,” he said to his chavrusa, Chaim. “Their business is based on chametz!”
“I was wondering about a similar issue,” replied Chaim. “Although I don’t own shares of stocks, I have mutual funds. I recently looked at the prospectus, and saw that one of their holdings was Domino’s Pizza, which accounts for one percent of their assets. That means that of the $50,000 invested in the fund, I have $500 invested in Domino’s Pizza!”
“That’s really funny!” said Mr. Krubmein. “I never thought to look into that!”
“I know that everyone has investments, though,” said Chaim, “at least as part of their pension plan. I assume that it must be OK.”
“Unfortunately, not everything that people do is correct,” said Mr. Krumbein. “Even if it is OK, I’d like to know why.”
“I also wonder,” said Chaim, “whether there is a difference between mutual funds, which are not direct shares in the company, and actual stocks.”
“That’s an interesting point,” acknowledged Mr. Krumbein. “I never owned actual stocks until now.”
“In any case,” added Chaim, “I assume that if you have a share in the chametz, you can include it in mechiras chametz.”
“I don’t think I can simply sell my stocks the way I sell the liquor that I own,” objected Mr. Krumbein.
Mr. Krumbein called Rabbi Dayan and asked:
“Am I allowed to hold my stocks over Pesach? What about mutual funds that own shares in chametz companies?”
“A Jew is not allowed to own chametz on Pesach, even in partnership with non-Jews,” replied Rabbi Dayan. “The Jew must either get rid of the chametz or divest his share in it” (O.C. 450:3; Binyan Zion #16).
“In civil law, a corporation is considered an independent legal entity. There is a debate among economists whether the shareholders, who hold their proportional share in the corporation, truly ‘own’ it.
“Contemporary poskim similarly discuss to what extent halacha recognizes the concept of a corporation as an independent entity, in which shareholders may be merely investors, or whether halacha views corporations simply as partnerships of the shareholders with certain contractual limitations.
“Cheshev Ha’efod (1:62), based on Rabbi Ettinger (Maharia Halevi 1:124), maintained that shareholders do not have actual ownership of the corporate assets – neither the chametz nor the physical plant – only financial responsibility of loss and gain, so that they are not obligated in biur chametz. He compares it to a Jewish guardian of a non-Jew’s chametz who returns the chametz to the premises of the non-Jewish owner, but retains financial liability and in this case does not violate bal yera’eh u’bal yimatzei” (see O.C. 440:1; Mishna Berurah 440:7).
“Chesheva Ha’efod further writes that the shareholders are not even obligated to sell their shares after they declare bitul chametz. Rav Moshe Feinstein (Igros Moshe, E.H. 1:7) similarly sees minority shareholders as mere investors.
“Minchas Yitzchak (3:1; 7:26), however, maintained that a corporation is considered a partnership and shareholders who have voting rights are considered as owners, albeit limited. Thus, they must include their shares in mechiras chametz. However, shareholders without voting rights in the company, or shareholders of mutual funds, are considered merely investors or lenders since they have no voice in the chametz corporation. Mo’adim U’zmanim (3:269) also requires including stocks in mechiras chametz.
“In practice, many contracts of mechiras chametz nowadays include stocks of chametz in the sale,” concluded Rabbi Dayan. “The poskim further explain that one can rely on the sale of the shares through mechiras chametz, even if the manner of sale does not conform with securities regulations” (Piskei Teshuvos 440:1).
Verdict: There is a dispute among the poskim whether shareholders are considered owners vis-à-vis chametz. In practice, many contracts of mechiras chametz include stocks.
