Judgment has just been handed down by the Privy Council in the landmark decision of Jardine Strategic Holdings Ltd & another v Oasis Investments II Master Fund Ltd & 80 others (No. 2) [2025] UKPC 34. 

This decision, which abolishes the so-called "shareholder rule", represents a significant shift in corporate law regarding shareholder rights and corporate privilege. 

What Was the "Shareholder Rule"?

Legal professional privilege protects confidential communications between a lawyer and a client from being disclosed without the client's consent. Subject to some exceptions, privilege is an absolute right. 

However, the "Shareholder Rule" could prevent companies from asserting legal advice privilege against their shareholders in litigation with them. This rule, which had been part of English law for nearly 140 years, was based on the idea that shareholders, as part-owners of the company, should not be excluded from accessing privileged communications in disputes with the company. 

However, this principle often led to practical difficulties in balancing corporate confidentiality with shareholder rights.

The Decision in Jardine Strategic Holdings Ltd v Oasis

In the Jardine Strategic Holdings case, the dispute was regarding the amalgamation of two companies within the Jardine Matheson Group, leading to court appraisal proceedings initiated by dissenting shareholders under Bermuda law (the dissenting shareholders seeking fair value for their shares). The shareholders sought access to privileged communications between the company and its legal advisers regarding the value to be offered for the shares. The courts in Bermuda, including the Bermuda Court of Appeal, upheld the Shareholder Rule, but the Privy Council overturned these decisions.

In a judgment delivered by Lord Briggs and Lady Rose, the Privy Council declared that the Shareholder Rule was "a rule without justification" and abolished it. The court emphasised that the rule was outdated and no longer aligned with modern corporate realities. Importantly, the Privy Council issued a Willers v Joyce direction, directing that the decision be binding on courts in England and Wales. 

Implications

The Jardine decision represents the end of the shareholder rule and companies can now assert legal advice privilege against their shareholders in litigation, just as they would against any other third party. This decision will be of significant comfort to directors and in-house counsel as confidential legal advice should be protected from disclosure. Unless confidentiality in the advice has been lost or if they already have a copy of the advice, shareholders will no longer be able to assert an entitlement to such advice under the shareholder rule.