Privy Council abolishes “Shareholder Rule” exception to legal advice privilege

2 October 2025

For more than 130 years, since the case of Gouraud v Edison Gower Bell Telephone Co of Europe (1888) 57 LJ Ch 498, English law has recognised the so-called “Shareholder Rule” which precluded companies from asserting legal advice privilege against their shareholders in litigation. Under the Shareholder Rule, a company cannot, in the course of litigation between itself and shareholders or former shareholders, withhold documents from inspection (by its shareholders or former shareholders) on the ground that the documents are covered by legal advice privilege.

However, in Jardine Strategic Limited v Oasis Investments II Master Fund Ltd (No 2) [2025] UKPC 34, a decision handed down in July 2025, the Judicial Committee of the Privy Council (“Privy Council”) declared that the Shareholder Rule should no longer be recognised in England and Wales.

This decision will be highly persuasive before the Singapore courts as explained below.

Brief facts of the case

The case concerned the amalgamation of two companies within the Jardine Matheson group, which resulted in the compulsory cancellation of shares in one of the companies. Some of the holders of cancelled shares who opposed the proposed transaction were dissatisfied with the compensation offered to them for their shares, and asked the court, pursuant to a statutory mechanism, to determine the fair value for their shares. The dissenting shareholders applied to the court for production of the legal advice given to the Jardine Matheson group when it formulated the compensation offered to the dissenting shareholders. The defendant company, which was formed from the amalgamation of the two companies within the Jardine Matheson group, withheld from inspection the legal advice given to the Jardine Matheson group on the basis that such documents were covered by legal advice privilege.

Applying the Shareholder Rule, the Bermudan court held that the defendant company was not entitled to maintain legal advice privilege in respect of legal advice received by the Jardine Matheson group. The issue before the Privy Council was whether the defendant company was entitled to withhold documents from inspection on the ground that the documents were covered by legal advice privilege or whether the dissenting shareholders were entitled to see the legal advice that was given to the Jardine Matheson group.

The Privy Council ruling

In allowing the defendant company’s appeal and rejecting the dissenting shareholders’ application for production of the legal advice obtained by the Jardine Matheson group, the Privy Council traced the historical basis for the Shareholder Rule as being premised on the supposition that the shareholders of a company had a proprietary interest in the company’s money from which legal advice to the company was paid for. The Privy Council explained that such belief was at odds with the proper analysis of a registered company as a legal person separate from its members such that the members have no proprietary interest in the funds of the company used to pay for the advice. The Privy Council concluded that the Shareholder Rule was thus a rule without jurisdiction “[l]ike the emperor wearing no clothes in the folktale”.

The Privy Council also held that it could not justify an automatic status-based denial of legal advice privilege between every company and all its shareholders, as it cannot sensibly be said that there is always a community of interest between every company and its shareholders, either as a class or individually.

The Privy Council further held that, as the interests of the company and its shareholders cannot be assumed to always be aligned, there was no joint interest between the company and its shareholders so as to justify an exception from legal advice privilege.

It should be noted that this decision does not change the law in relation to privilege once litigation between the company and its shareholders has started or is in contemplation, which is governed by the rules relating to litigation privilege. The decision also does not affect a shareholder’s right to inspection of company documents in the ordinary course of their relationship with the company, which is governed by the company’s constitution or the relevant companies legislation.

Key take-aways

The abolition of the Shareholder Rule brings welcome clarity to the application of legal advice privilege in disputes between shareholders and companies. Companies should not feel inhibited in seeking candid legal advice because of concerns that such advice may be disclosed to shareholders.

Although this was a decision of the Privy Council on appeal from Bermuda, the Privy Council directed that its decision in the present case should be treated as also representing the law of England and Wales (i.e. a direction of the kind made in Willers v Joyce (No 2) [2018] AC 843). This decision will accordingly be highly persuasive before the Singapore courts.

Reference materials

The judgment is available on the website of the Judicial Committee of the Privy Council www.jcpc.uk.