Abolition of the Shareholder Rule: Confirmation that a company can claim privilege against its own shareholders
In Jardine Strategic Limited v Oasis Investments II Master Fund Ltd and 80 others (No 2) (Bermuda) [2025] UKPC 34, the Privy Council has unanimously held that the Shareholder Rule – which allowed shareholders to access legally privileged company documents – no longer applies and declared this ruling will be binding on English courts.
Legal professional privilege is a fundamental right under English law which, broadly speaking, enables a party to obtain legal advice (“legal advice privilege”) and produce documents in contemplation of litigation (“litigation privilege”) by protecting such advice and documents from disclosure.
Historically, the “Shareholder Rule” has been an exception to legal professional privilege. Whilst company constitutional documents do not typically grant shareholders a general right to access company documents, the Shareholder Rule prevented a company from claiming privilege against its shareholders, except in relation to documents created for the dominant purpose of litigation between the company and its shareholders. This meant shareholders could obtain documents containing legal advice given to the company (before litigation was in contemplation) relating to the subject matter of the proceedings.
Following the landmark December 2024 judgment given by Picken J in Aabar Holdings S.á.r.l. v Glencore Plc [2024] EWHC 3046 (Comm) (Aabar), this entrenched rule was thrown into doubt with suggestions it “should no longer be applied”. This ran contrary to a long-standing body of case law which supported the Shareholder Rule and whether Picken J’s analysis would be endorsed in subsequent cases remained to be seen.
Hopes that the status of the rule may be clarified in Allianz & Others v Barclays Plc [2024] EWHC 2710 (Ch) - in which efforts were made to resist disclosure with reference to the Aabar judgment - were quashed when a consent order was filed in that case at the end of 2024. The Privy Council’s judgment in Jardine Strategic Limited v Oasis Investments II Master Fund Ltd and 80 others (No 2) (Bermuda) [2025] UKPC 34 has therefore brought much needed clarity to the status of the Shareholder Rule and will likely provide welcome relief to both company directors and in-house counsel.
The appeal to the Privy Council was brought by Jardine Strategic Limited (the Company), an entity formed from the amalgamation of two companies within the Jardine Matheson group (Group), Jardine Strategic Holdings Ltd (Jardine Strategic) and JMH Bermuda Ltd. The amalgamation resulted in all the shares in Jardine Strategic being cancelled and the Company was required to pay a fair value for those cancelled shares to shareholders. Minority shareholders, dissatisfied with the share price offered, brought proceedings under the Bermuda Companies Act 1981.
During proceedings, the Company asserted privilege over legal advice given to the Group when contemplating the share value offered as a fair value to shareholders. The claimant shareholders relied on the Shareholder Rule to argue they should have access to this advice. On review, the Privy Council held that there was no valid justification for the Shareholder Rule, confirming this formed no part of the law of Bermuda and expressly directing that the rule should also no longer be recognised in England and Wales.
The result of this is that unless shareholders have already been provided with a copy of legal advice given to the company before a dispute arose, they will no longer be entitled to access that advice during the disclosure process in litigation. This should provide comfort to both directors and in-house counsel who will not need to worry about the possibility of shareholders having an automatic right to access legal advice given to a company in any subsequent litigation. In terms of their ability to access privileged company information, shareholders have now been firmly placed in the same position as any other party who might wish to litigate against a company (with privilege only being lost in certain established circumstances).
