Judicial Committee of the Privy Council Declares the End of the ‘Shareholder Rule’ Regarding Privilege

In a landmark ruling handed down on 24 July 2025 (Jardine Strategic Limited (Appellant) v Oasis Investments II Master Fund Ltd and 80 others (Respondents) No 2 (Bermuda) [2025] UKPC 34), the Judicial Committee of the Privy Council (JCPC) concluded that the Shareholder Rule, which provided that a company could not assert legal advice privilege against its shareholders, should be abolished. Remarkably, while the case concerned an appeal from Bermuda, the JCPC declared that this ruling will apply to the English Courts—reversing over 100 years of this long-standing rule.

The case concerned the amalgamation of two companies, Jardine Strategic Holdings Ltd (Strategic Holdings) and JMH Bermuda Ltd, to form Jardine Strategic Limited (the Company) in April 2021. As a result of the amalgamation, shares in Strategic Holdings were cancelled and the shareholders were offered what was said to be a fair value of US$33 per share. A group of 90 dissenting shareholders (the Shareholders), dissatisfied with the price, subsequently commenced proceedings under the Bermudan Companies Act 1981 to have the share price appraised. As part of those proceedings, the Shareholders sought disclosure of the legal advice obtained by the Company in determining the value of the shares.

The issue in this appeal was whether—in light of the so-called “Shareholder Rule”—the Shareholders were entitled to see the legal advice given to the Company when determining the fair value of the cancelled shares. The Company asserted that these documents were covered by legal advice privilege and should not be disclosed to the Shareholders.

What is the “Shareholder Rule”?

The basis of legal advice privilege is well established in English law and other common law jurisdictions. In short:

(i) It covers confidential communications between lawyers and their clients whereby legal advice is sought and/or given.

(ii) Privilege can only be waived by the person entitled to it, i.e., the client.

The Shareholder Rule (first reported in Gouraud v Edison Gower Bell Telephone Co of Europe (1888) 57 LJ Ch 498) is a rule which states that a company cannot assert legal advice privilege against its shareholders. The justification for the rule developed over time but primarily reflected the fact that (i) the legal advice would have been paid for out of the company’s property, meaning that the shareholders indirectly paid for it, and (ii) there was a type of joint interest privilege between the company and its shareholders.

The rule established that privilege cannot be claimed in circumstances where the company and its shareholders have a joint interest in the subject matter of a communication at the time it comes into existence.

How Was It Affected by the JCPC Ruling?

The issues on appeal effectively concerned the question of whether the Shareholder Rule should continue to apply.

The JCPC ruled that the Shareholder Rule forms no part of Bermudian law, and also should no longer be recognised before the English Courts either, based on the following key points:

1. No proprietary foundation: The JCPC emphasised that the Shareholder Rule was wholly inconsistent with the concept of a registered company as a separate legal person. Unlike trusts, a shareholder is not a beneficial owner of the company’s assets. The rule also failed to take account of any contractual restrictions between a company and its shareholders.
2. Company independence: In a similar vein, the JCPC found that the rule was inconsistent with allowing a company (by its directors) to operate as a separate legal personality. Application of this rule would “discourage companies from obtaining candid legal advice in confidence. It would ignore the separate personality of the company and it would wrongly assume a simple coincidence of interests contrary to the typical commercial reality” [paragraph 89].
3. No joint interest privilege by status: The JCPC rejected the notion that all shareholders automatically share a joint interest. They highlighted that, in fact, shareholders often have different interests among themselves, especially where there are different classes. That being so, there is no automatic joint interest between a company and its shareholders as a homogenous unit.

Of note is that the JCPC fundamentally disagreed with the Shareholders’ and Court of Appeal’s proposition that the legal advice about the price for the shares was “plainly” a matter about which the Company and the Shareholders shared a joint interest. To the contrary, there was a fundamental divergence of interest between the minority and the majority.

The JCPC declared that this ruling shall also have effect in England and Wales, stating that they “are firmly of the view that this decision should be regarded by courts in England and Wales as abrogating the Shareholder Rule for the purpose of litigation in those courts, and so the Board declares” [paragraph 113].

Concluding Remarks

The JCPC’s decision in Jardine Strategic marks a decisive turning point in the law of privilege. By formally rejecting the outdated Shareholder Rule, the JCPC has closed the door on the assumption that shareholders are entitled, by virtue of status alone, to access privileged legal advice obtained by a company.

The ruling also re-emphasises a fundamental tenet of company law—that the company is a separate legal entity. Just as shareholders cannot automatically claim ownership over company property or contractual rights, they likewise have no entitlement to legal advice obtained by the company unless they are actual clients or share a clearly defined joint legal interest.

In terms of key points for companies to consider going forward:

(i) Any privilege management protocols should be reviewed. Legal advice should be kept confidential within a defined client group and this should be carefully monitored, particularly in scenarios where litigation risk or shareholder dissent is foreseeable.

(ii)In-house counsel and boards should be particularly mindful of managing any privileged material, especially during a restructuring or appraisal process.

(iii) When litigation is on foot or in contemplation, companies will now be able to assert privilege against their shareholders with greater confidence, without the possibility that this could be circumvented by the Shareholder Rule.

For shareholders and institutional investors:

(i) Investors should no longer assume that they can automatically access a company’s legal advice. They should consider establishing common interest privilege protocols to allow them to obtain copies of any legal advice provided to the company.

(ii) Activist/minority shareholders can no longer rely on the former Shareholder Rule to demand access to privileged documents. It is therefore all the more important that they ensure that appropriate governance mechanisms are in place, including in relation to nominee directors.

Our International Disputes team is on hand to assist with any queries following this decision.