Jardine Strategic v Oasis: demise of the shareholder rule

After more than a century of debate and uncertainty, the Privy Council has delivered a landmark judgment confirming that the ‘shareholder rule’ has no place in English law. In Jardine Strategic Ltd v Oasis Investments II Master Fund Ltd and others (2025), the Board unanimously held that companies may rely on legal professional privilege against their own shareholders and further directed that this ruling will bind the courts of England and Wales.

The shareholder rule

Established in 1888, the shareholder rule had traditionally meant that a company could not assert legal professional privilege against its own shareholders, except in relation to documents created for the purpose of hostile litigation with those shareholders. In practice, the rule enabled shareholders engaged in litigation with their company to obtain access to legal advice that would otherwise be protected and privileged.

The rule was historically justified on two grounds.

The first ground was proprietary. Given that legal advice was funded from company assets, shareholders were thought to have a right to access it, much like beneficiaries who are entitled to see advice obtained by trustees at their expense.

The second ground was joint interest privilege. It was assumed that companies and their shareholders shared a common interest in legal advice obtained and so privilege could not operate between them.

The facts

In 2021, Jardine Strategic Holdings amalgamated (under Bermudan law) with another group company, cancelling all its shares and offering dissenting shareholders a fixed price as ‘fair value’ under Bermudian company law. Several shareholders disputed the adequacy of that price and invoked a statutory procedure for the court to determine fair value. In the course of those proceedings, they sought disclosure of legal advice obtained by the group when setting the price, arguing that the shareholder rule entitled them to see it.

The decision

The Privy Council held that those grounds for the shareholder rule were unsustainable. The proprietary rationale had been overtaken by the principle established in Salomon v Salomon & Co Ltd (1897), which made clear that a company is a separate legal entity from its shareholders and that shareholders have no proprietary interest in a company’s assets. To continue to base an exception to privilege on such a justification was inconsistent with company law.

They also rejected the notion that joint interest privilege could sustain the shareholder rule. The interests of companies and shareholders are often not aligned. Even shareholders within the same class may have different interests and across classes those interests frequently conflict. The judgment rejected the idea that company and shareholder interests are broadly aligned, deeming it a “serious oversimplification”.

Also rejected was the approach which had suggested that shareholders could, in certain circumstances, demonstrate a sufficient joint interest in a company’s legal advice. It was held that such a case-by-case test would create unacceptable uncertainty, leaving directors unable to predict whether legal advice sought would be able to retain its privileged status. The likely consequence of this would be to deter companies from seeking legal advice altogether, thereby undermining the fundamental purpose of legal professional privilege.

By way of a Willers v Joyce direction, the Privy Council signalled that its judgment to abolish the shareholder rule is to be applied by the courts of England and Wales.

What does this mean in practice?

The judgment represents a significant loss of leverage for shareholders in disputes with their companies. Historically, the shareholder rule offered an avenue to access legal advice that might be highly relevant. That possibility has now been removed. Shareholders will be treated in the same way as any other litigant seeking disclosure, meaning that privilege will bar access to company legal advice (save in the event of one of a few, very limited exceptions applying).

For companies and directors, the landmark decision brings certainty and reassurance. Boards can now seek legal advice knowing that it will remain confidential and protected from disclosure to shareholders, even in the context of litigation. The ruling can be seen as levelling the playing field between companies and shareholders in litigation, while also giving directors the confidence to seek and obtain legal advice when required, without fear of later disclosure.

Concluding thoughts

The demise of the shareholder rule marks the end of a doctrine that had long been difficult to reconcile with modern principles of company law and legal privilege. Shareholders can no longer rely on their status to access privileged company advice while companies and directors gain confidence that their legal communications will remain confidential. The Privy Council’s decision is a decisive clarification that reinforces the doctrine of privilege while significantly altering the landscape of shareholder litigation.

In the world of venture capital, prudent institutional investors will make note of the judgment and be concerned to see that they have direct access to key company information by way of express contractual information rights set out in the shareholders’ agreement (or elsewhere) and perhaps also via their board appointees.

This piece was written by Sanya Bhambhani and Robert Humphreys.  As ever, if you have questions about any of the issues raised in this Insight piece or are unsure as to your position then do please reach out to a member of the team here at HLaw if you would like assistance working out if there are areas of potential exposure for you and/or your company.

All the thoughts and commentary that HLaw publishes on this website, including those set out above, are subject to the terms and conditions of use of this website.  None of the above constitutes legal advice and is not to be relied upon.  Much of the above will no doubt fall out of date and conflict with future law and practice one day.  None of the above should be relied upon.  Always seek your own independent professional advice.

Humphreys Law