Privy Council confirms end of shareholder rule

The Privy Council has emphatically confirmed the abolition of the long-standing "Shareholder Rule", which previously prevented a company, in the course of litigation against its shareholders, from withholding documents from them on the basis of privilege. The court held that "Like the emperor wearing no clothes in the folktale, it is time to recognise and declare that the Rule is altogether unclothed".

Jardine Strategic Ltd v Oasis Investments Master Fund Ltd (No.2) [2025] UKPC 34 builds on the recent decision of the High Court in Aabar Holdings [2024] EWHC 3046 (Comm). It is made directly binding on the English courts via a "Willers -v- Joyce" direction and effectively carries the authority of a Supreme Court decision.

For our earlier analysis of the decision in Aabar, read: Shareholder rule overturned: companies can assert privilege in litigation.

Practical takeaways

The decision removes a key disclosure weapon from the arsenal of activist and dissenting shareholders and further strengthens legal professional privilege for companies.

Directors can now seek candid legal advice on contentious corporate actions (M&A, restructurings, capital raisings) with significantly greater confidence that it will remain privileged, even in subsequent disputes with shareholders.

Background to the dispute

The dispute arose from a 2021 amalgamation within the Jardine Matheson group, which resulted in the cancellation of shares in Jardine Strategic Holdings Ltd. Dissenting minority shareholders, who were offered US$33 per share, were unsatisfied and brought statutory appraisal proceedings in Bermuda to have the court determine the "fair value" of the shares. In those proceedings, the shareholders sought disclosure of the legal advice Jardine had received when determining the US$33 figure. The company claimed the advice was protected by legal professional privilege.

No joint interest privilege between companies and shareholders

The Privy Council accepted the company's appeal against earlier rulings by the Bermudan courts that it was not entitled to maintain legal advice privilege against its shareholders. It found that:

1. The original, status-based justification for the Shareholder Rule was "wholly inconsistent with the proper analysis of a registered company as a legal person separate from its members" and declared it was "now, and in truth has always been, a rule without justification".

2. The "joint interest" justification was rejected. The Privy Council held there is "no sufficient, analogy" with other relationships where joint interest privilege applies, such as trustee-beneficiary or joint venturers. It noted that on the facts of the case, there was a "fundamental divergence of interest" between the majority and minority shareholders, making any notion of a joint interest unrealistic.

3. A key policy reason for the decision was that directors must have certainty when seeking advice. The Privy Council held that a flexible, fact-sensitive analysis as to whether a company's legal advice would remain confidential "suffers from [a] fatal dose of uncertainty", as directors could not know at the time of seeking advice whether a court will later find that a joint interest existed.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP, August 2025