On 24 July 2025, the Privy Council handed down its decision in Jardine Strategic Limited v Oasis Investments II Master Fund Ltd and 80 others (No 2) (Bermuda) [2025] UKPC 34. The decision marks a conclusive end to the so-called “shareholder rule”, a Victorian-era legal principle that prevented companies from asserting legal privilege against their shareholders.
The shareholder rule has been falling out of judicial favour in recent years, with several decisions (e.g., Various Claimants v G4S; Aabar Holdings v Glencore) questioning its scope and rational basis1. The Privy Council placed this timely question at the forefront of its judgment: "Should the shareholder rule continue to exist in some form?"
The Privy Council's answer is confident and far-reaching: the rule should not exist, either in Bermuda or elsewhere. In this article, we consider the origins of the rule, the boundaries of relevant principles of English company law, and what this decision means for directors and their decision-making.
Background to the case
On 14 April 2021, two Bermudan companies, Jardine Strategic Holdings Ltd and JMH Bermuda Ltd, amalgamated to form a new entity, Jardine Strategic Limited ("JSL"). All existing shares in the legacy companies were cancelled, with dissenting shareholders entitled under Bermuda’s Companies Act 1981 to be paid the "fair value" of their shares.
JSL offered to pay $33 per share. A group of institutional investors challenged JSL's valuation and triggered statutory appraisal proceedings, seeking disclosure of legal advice obtained by JSL regarding the valuation.
JSL resisted disclosure on the grounds that the advice was legally privileged. In response, the shareholders invoked the Shareholder Rule, arguing that JSL could not assert privilege against its shareholders. The issue was appealed to the Privy Council, which ruled in favour of JSL, denying the shareholders access to the company's privileged advice.
Remarkably, in addressing whether the shareholder rule should apply to JSL, a company incorporated in Bermuda, the Privy Council took the unusual step of declaring that the rule should not exist in England and Wales either. Anticipating ongoing litigation in England, expected to reach the Court of Appeal in 2026, the Privy Council said, "the members of the Board in the present appeal, all also being Justices of the Supreme Court, 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 the Board so declares".
With that, the shareholder rule is no more.
Rationale
The shareholder rule derived from the principle that shareholders, as owners of a company, should be entitled to access legal advice obtained by that company. Shareholders asserted that privilege vested in the company should extend to shareholders, and the courts for a long time supported that proposition.
The shareholder rule was perceived to be a sub-species of joint or common interest privilege. Shareholders and the company were seen as having a shared interest in the legal advice given for the benefit of the company.
The exceptions to the shareholder rule were those where the interests of shareholders and the company diverged. This created not only tension between the company’s need for confidential legal advice and the shareholder’s right to transparency but also inconsistency and grey areas. The judgment of the Privy Council seeks to eliminate any remaining grey area, citing with approval Lord Scott's seminal judgment in Three Rivers No.6:
"Legal advice privilege is absolute. It can be waived by the client, overridden by statute, but not subject to a balancing exercise"2
As such, the rationale justifying the shareholder rule, while historically rooted in notions of ownership and transparency, ultimately conflicts with the modern understanding of corporate personality and the absolute nature of legal advice privilege.
Recent trends and judicial scepticism
The Privy Council’s decision in this case represents not so much a radical turning point as the culmination of a trend in recent years in which the judiciary have grown increasingly sceptical about the shareholder rule. It also reflects a return to increasingly orthodox interpretations of how legal advice privilege should operate and its important role in corporate decision-making.
In 2023, Mr Justice Michael Green described the shareholder rule as having a "somewhat shaky foundation"3. Then, in November 2024, Mr Justice Picken handed down his first instance decision in Aabar Holdings v Glencore, ruling that the shareholder rule was unjustifiable and incompatible with foundational principles of corporate personality and the rule in Salomon v Salomon.4
In Aabar Holdings, Picken J also rejected the framing of the shareholder rule as a species of joint interest privilege, ruling that such privilege requires a genuine shared legal interest, not just a financial or corporate connection of the generic kind that exists between a company and its shareholders.
Lessons for directors
Picken J's decision in Aabar was due to go to the Court of Appeal in early 2026, but any possibility of overturning his decision now seems doomed to failure. Directors and shareholders must therefore adjust to the new reality: but what lessons should directors take from this decision?
Lesson one: legal advice is fundamental to corporate decision-making
Company directors should feel empowered to seek legal advice with confidence that such advice will remain privileged and confidential, even where it relates to matters in which shareholders have a particular interest. This includes issues that are frequently the subject of shareholder disputes, such as mergers and acquisitions, strategic asset sales, and internal investigations.
The Privy Council confirmed that legal advice privilege is a fundamental right of the company and is not displaced by a shareholder’s interest. Directors can therefore rely on legal advice while complying with their statutory duties under sections 172 and 173 of the Companies Act 2006, and this clarity should help boards evaluate risks objectively and resist improper pressure from shareholders.
At the same time, any directors or boards that fail to take advantage of this freedom may find themselves subject to more criticism and scrutiny. A director who declines to obtain or consider legal advice will need to be able to answer the inevitable question, "why not?"
Lesson two: directors are not obliged to share legal advice with shareholders (and should be cautious about doing so voluntarily)
The decision clarifies that directors are not required to disclose legal advice to shareholders unless compelled by law or necessary to fulfil a specific statutory duty.
While there is much less scope to compel companies to disclose legal advice, some companies may still want to do so voluntarily. But should they? Not without being very cautious about whom privileged advice is shared with. Inadvertent waiver of privilege remains a risk and directors should always think carefully about whether to voluntarily share privileged advice with shareholders or anyone else besides key decision makers.
If the sharing of privileged advice is unavoidable, directors should take steps to preserve privilege both as against shareholders and third parties. Consider sharing only a high level summary of advice instead of copies of the privileged communications themselves. Alternatively, if a summary will not suffice, directors should ensure appropriate confidentiality terms are put in place before any privileged advice is shared.
Lesson three: director decisions must always be defensible
Although the Privy Council's decision centred on privilege, it arose in the context of a shareholder challenge to the fairness of a share valuation. Directors involved in transactions affecting shareholder rights such as amalgamations or buyouts must ensure that valuations are robust, transparent, and capable of withstanding scrutiny. The judgment acknowledges that "The company and the shareholders going forward after the amalgamation will have an interest in the chosen figure being towards the lower end of the range of reasonable fair values and the departing shareholders will have an interest in the highest reasonable value being adopted".
That is to say: different groups of shareholders may have differing perspectives on what is reasonable, or fair, or appropriate. The same is often true in innumerable scenarios throughout the lifetime of a company. While directors have discretion to take decisions in their company's best interests, the exercise of that discretion must be justifiable and rationally defensible. Even after the Privy Council's decision, directors should be prepared to defend controversial decisions against disgruntled shareholders. While directors may not be required to disclose the contents of legal advice, they will still be required to ensure their decisions are based on sound reasoning and are properly documented.
Conclusion
While shareholders retain important rights and remedies, this decision solidifies the principle that being able to obtain legal advice without fear of wide disclosure is essential for directors to fulfil their duties with independence, integrity, and confidence.
Without access to privileged legal advice, shareholders may face greater difficulty in challenging board decisions, and this will in turn make it harder for shareholders to bring derivative claims/unfair prejudice petitions.
Despite this, directors should still expect scrutiny. Although the Privy Council decision represents a material shift in favour of board autonomy, boards may nevertheless want to take this opportunity to review their governance practices and ensure legal advice is appropriately sought and safeguarded.
Clarissa Coleman (partner) and Alexander Bradley-Sitch (Senior Associate) are in the Commercial Litigation Group at DAC Beachcroft in London.
[1] Various Claimants v G4S plc [2023] EWHC 2683 (Ch)
Aabar Holdings SARL v Glencore plc & ors [2024] EWHC 3046 (Comm).
[2] Jardine Strategic Limited v Oasis Investments II Master Fund Ltd and 80 others (No 2) (Bermuda) [2025] UKPC 34, para. 22, citing
Three Rivers District Council v Governor and Company of the Bank of England (No 6) [2004] UKHL 48, para. 25.
[3] Various Claimants v G4S plc [2023] EWHC 2683 (Ch), para. 42.
[4] Salomon v A. Salomon & Co Ltd [1896] UKHL 1.
