The UK Privy Council has confirmed (in a binding decision) in Jardine Strategic Ltd v Oasis Investments II Master Fund Ltd [2025] UKPC 34 that the Shareholder Rule should no longer be recognised as forming part of English law.
What is the Shareholder Rule?
The Shareholder Rule previously enabled shareholders in proceedings against a company to access privileged and confidential documents belonging to the company if those documents existed before proceedings were commenced or considered.
Shareholders were able to do this because the rule overrode ‘legal professional privilege’: a type of privilege which protects legal advice/communications between lawyers and their clients from being disclosed during legal proceedings. This made the Shareholder Rule a significant tool during legal proceedings and could often be used as a tactical lever by shareholders to put companies under pressure. Such pressure could take the form of encouraging claims or early settlements, for example.
The reason why shareholders were able to rely on the rule for so long is because of their ‘proprietary interests’ in a company. By that we mean their interests in profits, rights, ownership shares etc. In the context of privileged documents and advice, the justification for the rule was simply that: if a company had obtained advice on the running of the company for example, which had been paid for using company assets, then shareholders had indirectly paid for that advice and would be entitled to see it.
How has the Shareholder Rule been applied recently?
More recently however, the Shareholder Rule has come under increased scrutiny. In Various Claimants v G4S plc [2023] EWHC 2683 (Ch), the Court observed that shareholders have no direct proprietary interest in company property. This is consistent with modern corporate law principles affirming that companies have separate legal personalities.
In Aabar Holdings SARL v Glencore plc [2024] EWHC 3046 (Comm), the Shareholder Rule was directly challenged for the first time when the court held that it should be abandoned.
The Privy Council’s ruling in Jardine Strategic
The Privy Council ruled that the original proprietary justification for the rule (set out above) is inconsistent with the proper analysis of a registered company as a legal person separate from its members. This means that the company, as its own legal person, is entitled to benefit from legal advice privilege, particularly as shareholders of the company do not actually have a direct interest in the company’s property.
The Privy Council also rejected “joint interest privilege” as an alternative argument to justify the Shareholder Rule. This type of privilege allows parties with a shared legal interest to access privileged documents. Though it said it was not reviewing joint interest privilege, the Privy Council made clear thar the company/shareholder relationship cannot be likened to relationships which were covered by joint interest privilege. It highlighted the diversity of shareholder interests and the potential for conflict, meaning joint interest privilege could not apply here.
What this means for Shareholders and Companies going forward
The Privy Council’s decision means that shareholders can no longer rely on the Shareholder Rule to access privileged documents and advice in the course of proceedings against its company.
For directors and shareholders that have obtained legal advice, they can be assured that such advice will remain privileged and not accessible by the party bringing action against the company.
We expect this will impact the litigation landscape for companies and shareholders. The Shareholder Rule had previously been used to exert tactical leverage in disputes, putting companies under pressure if internal advice could be accessed. Following this decision, there could be a decline in shareholder litigation or alternatively, a decline in early settlement of shareholder disputes (as access to privileged documents can no longer be used to exert leverage to bring claims or settle them early).
How B P Collins LLP can help
At B P Collins LLP, our Commercial Litigation team advises shareholders and directors on a range of disputes. To get in touch, please email enquiries@bpcollins.co.uk or call 01753 889995.
