An end to the Shareholder Rule – another blow to a shareholder’s ability to hold a company to account

In this article, we consider the impact of the judgment in Jardine Strategic Holdings Ltd (Appellant) v Oasis Investments II Master Fund Ltd and others (Respondents) No 2 (Bermuda) [2025] UKPC 34 ("Jardine v Oasis"), a case from Bermuda which was decided by the Privy Council on 24 July 2025.  

The case is significant in its dismissal of the 140-year-old Shareholder Rule and has broad implications, particularly given the Court's direction that - since all members of the present Council were also justices of the Supreme Court - the decision "should be regarded by courts in England and Wales as abrogating the Shareholder Rule for the purpose of litigation in those courts".

As well as marking a significant change, the decision appears to be another blow to shareholders hoping to hold public companies to account and is a further obstacle to "US-style" shareholder activism in the UK.  

What is the Shareholder Rule?

The Shareholder Rule has previously been expressed as a common law rule that arises in the context of litigation when a shareholder seeks disclosure of legal advice that the company has previously received. It meant that a company could not assert a claim to privilege against its own shareholders, except where the documents were produced for the purpose of the litigation with that shareholder. (Outside the context of litigation, there is no general right to disclosure of advice obtained by the company for shareholders, unless provided for in the company's constitutional documents.)

Notably, the 2024 High Court case of Aabar Holdings SARL v Glencore Plc had already decided that there was no justification for upholding the Shareholder Rule in English law. Permission for a leap-frog appeal to the Supreme Court was refused and the court stated that the issue was likely to be resolved or clarified by the Privy Council in Jardine v Oasis.

The case law on this issue has described the Shareholder Rule as having two main justifications:

1. The proprietary interest: that the shareholders of a company have a proprietary interest are therefore entitled to see the legal advice paid for out of the company's funds.
2. The joint interest privilege relationship: that shareholders have a joint interest with the company in any legal advice given to it.

The facts

In Jardine v Oasis, two companies within the Jardine Matheson group were being amalgamated. The result was that all shares in Jardine Strategic Holdings Ltd were cancelled. Under the Bermudan statute, a company is required to pay fair value for the cancelled shares of those members who voted against the transaction. A number of shareholders were not satisfied with the price offered to them for their shares.

The Shareholder Rule became relevant during disclosure when the claimant shareholders sought discovery of the legal advice that was given when setting the share price. The company asserted legal advice privilege over those documents and refused to disclose them. The claimants relied on the Shareholder Rule, arguing that a company cannot – in the course of litigation – refuse to disclose documents to its own shareholders on the basis of legal advice privilege.

There being no precedent on this point in Bermudan law, the Court of Appeal held that English law was applicable and there was no reason why the Shareholder Rule should not stand.

The Privy Council Judgment

We summarise the key points from the judgment:

• The original justification for the Shareholder Rule was the proprietary basis. This is inconsistent with a company having a separate legal personality. As such, it has been abandoned in recent case law since it could not support a company's legal right to seek and receive legal advice in confidence.

• Further, the joint interest privilege justification was developed in order to maintain the continued existence of the Shareholder Rule.

• The joint interest privilege justification does not hold water since all shareholders in a company cannot genuinely be considered to have a common shared interest, unlike other established examples such as trustees and beneficiaries, principals and agents or joint venturers.

• Even within a single class of shareholders, the interests of individuals will diverge; they are not simply a "homogenous block."

The Privy Council's death knell to the Shareholder Rule is clear from this extract:

"The status-based automatic Shareholder Rule is therefore now, and in truth has always been, a rule without justification. Like the emperor wearing no clothes in the folktale, it is time to recognise and declare that the Rule is altogether unclothed."

Our thoughts on the judgment

This judgment is significant for corporate and commercial lawyers advising companies, as well as litigation practitioners dealing with disclosure in the context of corporate/shareholder disputes.  A company can now have more confidence in its ability to obtain legal advice without fear of that advice being disclosed to shareholders in the context of litigation.

Separate to the reasoning behind the judgment, in our view the decision also adds to the already significant obstacles to bringing shareholder claims and will provide further challenge to those hoping to engage in shareholder activism.  In particular, the case is likely to impact the landscape on S90A/Schedule 10A FSMA claims.

S90A/Schedule 10A FSMA are intended to provide shareholders with a means to hold listed companies accountable, if they have suffered loss because of relying on misleading statements or dishonest omissions in information published by the company. Whilst there has been an increase in these claims in recent years (albeit a dearth in relevant decisions remains), they are notoriously difficult to bring. Shareholders face several obstacles, such as the requirement to show that a person discharging managerial responsibility (PDMR) knew or was reckless as to whether a statement was untrue or misleading (or knew an omission to be a dishonest concealment).

A recent decision on the meaning of "reliance" in the context of these claims is also currently a challenge to shareholders. In Allianz Funds Multi-Strategy Trust & Ors v Barclays Pls [2024] EWHC 2710 (Ch), the court clarified the meaning of "reliance" and stated that for the claimants to demonstrate reliance, they had to show that they had read or heard the representation, understood it in the way it was alleged to be false and that this caused them to act in a way that caused them loss. As such, "passive investors" relying on price/market reliance arguments could not succeed in their claims. (We note comments by the judge in a further case currently in the High Court suggests that this matter is yet to be decided conclusively.)

In addition to the above burdens placed on a potential shareholder claimant, there is an inherent imbalance of information in these cases since the company is usually the party that holds the documents relevant to the claim. Furthermore, these cases often require funding. The Jardine v Oasis decision is likely to be another impediment to shareholders and their lawyers' persuading a funder that a case is worth backing. In circumstances where proving knowledge of a PDMR will be required, where "passive" reliance won't do, and where disclosure of advice given to a company will not be obtained, it would seem that a shareholder has quite the mountain to climb if seeking to persuade a funder that their claim has good prospects.

How can we help?

Please reach out to us if you need any assistance in dealing with disputes in relation to company law or shareholder matters. We frequently act on behalf of both companies and shareholders in such disputes and will work to support you and/or your business in any contentious matters.