UK Privy Council rules that companies are entitled to assert privilege against their own shareholders

In a significant judgment handed down on 24 July 2025, the UK Privy Council in Jardine Strategic Ltd v Oasis Investments II Master Fund Ltd & Ors No 2 (Bermuda) [2025] UKPC 34 (Jardine No.2) has ruled that the longstanding ‘shareholder rule’ – under which a company cannot assert privilege against its own shareholders except where the documents concerned were created for the dominant purpose of hostile litigation between the company and the shareholders themselves – “forms no part of the law of Bermuda, and that it ought not to continue to be recognised in England and Wales”.

Although the decision is one of the Privy Council, it has effect in the UK by virtue of the Privy Council issuing a Willers v Joyce direction. This ruling therefore marks the end of a principle that had been recognised by courts for over 135 years, including by the UK Court of Appeal in Sharp v Blank [2015] EWHC 2681 (Ch). 

Bitesize Comment: The abolition of the shareholder rule is a significant and welcome development for companies. The rule has long looked out of place in modern company law, with companies (especially listed companies) having thousands of institutional and retail shareholders who, at least in theory, by virtue of the rule were given the right to access privileged documents that went beyond their general rights to access a company’s documents. The rule created an unusual situation where a company might need to seek advice in relation to a matter, for example, regulatory enforcement action or a contentious transaction which may not be to the benefit of all shareholders, but in seeking that advice would face the risk that legal advice would become disclosable in subsequent litigation, should disgruntled shareholders later issue a claim, on the basis that all shareholders share a joint interest with one another. With the abolition of the rule, companies have more certainty that they can seek legal advice without later being compelled to disclose that advice. This decision will be welcomed by companies and their boards in situations such as M&A transactions, restructurings and scenarios which may later become the subject of shareholder litigation. The decision also brings some much-needed clarity to shareholders who may still be able to access privileged documents in litigation with a company if one of the other privilege exceptions applies. However, the shareholder rule can no longer be used as the basis for requesting the disclosure of privileged documents from the company in litigation.

Bermudan case history

On 24 July 2025, the Privy Council handed down two judgments arising out of a dispute in Bermuda following the amalgamation of two companies within the Jardine Matheson group. The dispute arose because a number of shareholders considered that the valuation of their shares was too low and asked the Bermudan court to appraise (and require Jardine to pay them) the “fair value” of their shares.

Jardine No.2 – which is the focus of this briefing – centred on whether Claimant shareholders could access legal advice provided to the company they held shares in for the purposes of litigation against that company, particularly during the disclosure phase.

Overview of the Shareholder Rule

Historically the shareholder rule was grounded in the now outdated notion that shareholders possess a proprietary interest in company assets and thus have a right to access legal advice funded by those assets — provided the advice was given before any shareholder dispute arose or was contemplated. Over time, this proprietary justification was increasingly replaced with the argument that the rule embodied an example of joint interest privilege. 

Privy Council decision in Jardine No.2

Lord Briggs and Lady Rose, with whom all other justices agreed, held that the shareholder privilege rule forms no part of the law of Bermuda and should not be recognised in England and Wales.

Drawing an analogy to “the emperor wearing no clothes”, Lord Briggs and Lady Rose “unclothed” the shareholder rule as having no justification and as having always been without a justification. Although the proprietary basis for the shareholder rule was not advanced by the parties in this appeal, Lord Briggs and Lady Rose emphasised that it is fundamentally at odds with the modern legal understanding of a company as a separate legal personality distinct from its shareholders. 

The alternative argument which is more recent — treating the rule as a form of joint interest privilege — was relied on by the Counsel for the Respondent shareholders but it was similarly rejected by the Privy Council which found that it cannot justify “an automatic status-based denial of legal professional privilege between every company and all its shareholders.”

Three of the key strands to the Respondents’ arguments on joint interest are described further below.

1.General rule that joint interest exists between a company and its shareholders

In seeking to argue for the joint interest justification for the shareholder rule, Counsel for the Respondents argued that there was no automatic rule meaning shareholders would always be able to access privileged materials in a disclosure application. Instead, joint interest “generally existed” in the company and shareholder relationship but there might be exceptions where the interest between the company and shareholder did not create a sufficient joint interest. Counsel for the Respondents argued that this tempered joint interest was similar to the joint interest which arose in the relationship between trustee and beneficiary, principal and agent and as between partners, joint venturers and certain insurance relationships. 

However, the Privy Council found that the company and shareholder relationship was not the same as those other relationships in which a joint interest arises and that it was an oversimplification to say that – what is good for a company’s business is usually good for a shareholder. 

Lord Briggs and Lady Rose recognised that shareholders are “not a homogenous block with a single, shared interest”. Within a modern corporate structure, shareholders often have competing interests to each other, e.g. some focus on short term dividend payments whilst others look to long term capital growth or, as was relevant to the facts in Jardine No.2, some shareholders may be supportive of a particular transaction or merger and others may not be. This is particularly the case for large companies but also for small, family-owned businesses. The interests of shareholders can also further diverge from the interests of other stakeholders.

Lord Briggs and Lady Rose re-articulated concerns cited in previous cases that a broad shareholder rule would discourage companies from obtaining candid legal advice in confidence, ignore the separate personality of the company and wrongly assume a simple coincidence of interests contrary to the typical commercial reality.

2. No general rule but fact sensitive joint interest test

The Privy Council also rejected the possibility for an approach to the shareholder rule which did not automatically find a joint interest between company and shareholder but required the shareholder to demonstrate a sufficient joint interest in the obtaining and receiving of the advice on the particular facts of each case. The Privy Council held that allowing privilege to depend on a nuanced, case-specific analysis of shareholders’ joint interest would introduce unacceptable uncertainty to a “fundamental right to seek legal advice in confidence”. Directors would seek legal advice and it would be impossible for them to know at the time whether it would be protected from disclosure in subsequent litigation between the company and shareholders.

The Privy Council also held that a “general rule that privilege would not be available, subject to fact-sensitive exceptions, would be even worse”. Directors would have to assume that they could not obtain confidential legal advice.

Legal professional privilege must be governed by a “bright line” rule, otherwise the point of the privilege – to encourage the taking of legal advice – fails.

3. Contractual relationship between company and shareholders

The Privy Council acknowledged that the relationship between a company and its shareholders is essentially contractual, by virtue of the company’s constitution. Those bye-laws normally restrict what documents a shareholder is entitled to see – as was the case in Jardine No.2 and as is typical in the articles of association of UK incorporated companies (including in the Model Articles for both private and public companies).

As such, shareholders are not usually able to demand access to a company’s legal advice in any situation outside the context of a disclosure exercise in later hostile litigation between the shareholder and company. Disclosure is normally subject to privilege and therefore, perhaps unsurprisingly, the Privy Council held that “it is strange that an exception to that same privilege can be mounted on the basis of a special relationship (company and shareholder) when the express contractual terms of that relationship point clearly in the opposite direction”. 

Willers v Joyce Direction

The Privy Council made a Willers v Joyce direction which confirms, in no uncertain terms, that the abolition of the shareholder rule is binding on the courts of England and Wales.

Detailed Comment

The shareholder rule had long looked out of place in the modern world and many practitioners have been sceptical of its validity for some time, with the decision in Sharp v Blank being out of kilter with general sentiment. The Jardine No.2 judgment now finally settles the debate, which was opened wide following G4S[1] and Glencore:[2] shareholders cannot obtain privileged communications in future disputes subject to the other well-established exceptions – which do not include the shareholder rule.

This provides greater clarity and predictability for both companies and shareholders whether involved in litigation or not.

It brings certainty to boards and in-house counsel regarding the privileged status of legal advice sought in all areas of corporate life. It will also be of particular comfort to companies facing, or contemplating, securities litigation in the UK.

Boards, their advisors and others who come into contact with privileged materials should refresh themselves on the applicable privilege rules and ensure they have the right processes in place. 

For shareholders, it sets clear boundaries regarding access to company documents in the context of litigation, allowing them to navigate litigation with a clearer understanding of their position. While shareholders will not generally be able to compel disclosure of a company’s privileged pre-litigation legal advice based solely on the fact that they were a shareholder, they may still be able to access documents in certain circumstances where an exception applies, e.g. where privilege has been waived.

More generally, at a time when legal privilege has been eroded in a number of respects in recent years, lawyers and those seeking legal advice will be reassured by the recognition, by the most senior justices in the UK, of the need for clear rules around privilege to encourage the taking of legal advice. 

Freshfields is experienced in advising both companies and shareholders on these complex issues, and we continue to act on a range of matters which give rise to such privilege considerations. Freshfields also acted for G4S in the matter referred to above.

[1] In Various Claimants v G4S Plc [2023] EWHC 2863 (Ch), the High Court described the rule’s foundations as “somewhat shaky”. However, the court in G4S refrained from ruling definitively on the point, leaving the matter open for a higher court.

[2] More recently in the High Court case of Aabar Holdings S.à.r.l. v Glencore plc & Ors [2024] EWHC 3046 (Comm), Mr Justice Picken found that the shareholder rule “is unjustifiable and should no longer be applied.”  The claimants had been granted permission to appeal that decision to the Court of Appeal. However, the appeal hearing has now been vacated because its outcome has been rendered academic as it has been superseded by the Privy Council decision in Jardine No.2.