What is the “shareholder rule”?

• Communications between a lawyer and their client, sought for the dominant purpose of giving or receiving legal advice, are protected by the English courts from disclosure due to the concept of legal professional privilege.
• For 135 years the shareholder rule had been acknowledged as one of few exceptions to the legal professional privilege rule. The rule enables a shareholder, in proceedings against the company they hold shares in, to obtain privileged documents belonging to that company (provided litigation is not on foot or in contemplation).
• The shareholder rule was justified on the basis that shareholders have a proprietary interest in the advice received by the company.

Recent decisions regarding the shareholder rule

• In a bold judgment by Mr Justice Picken’s last year in Aabar Holdings SARL v Glencore PLC & Ors [2024] EWHC 3046 (Comm), Picken J found that the shareholder rule could no longer be supported or justified.
• Picken J also found:
  • The shareholder rule could not be justified on the basis of joint interest privilege.
  • Even if the shareholder rule did exist, it would not apply to documents protected by without prejudice privilege.
• Last week, the Privy Council in a Bermuda appeal (Jardine Strategic Limited v Oasis Investments II Master Fund Ltd and 80 others No 2 (Bermuda) [2025] UKPC 34), found that the shareholder rule really is no more (or in their words “Like the emperor wearing no clothes in the folktale, it is time to recognise and declare that the [Shareholder] Rule is altogether unclothed”).  
• Lord Briggs and Lady Rose jointly observed that:
  • The rule had always lacked justification; and
  • The rule is wholly inconsistent with the proper analysis of a registered company as a separate legal entity.
• Essentially, both judgments confirm that claimant shareholders (and former shareholders) do not have a joint interest privilege in legal advice obtained by the company.

Is the shareholder rule really altogether ‘unclothed’?

• Privy Council decisions carry weight and importance but are not always considered binding by the English Courts. In Jardine, however, the Privy Council declared that their decision should also be taken as reflecting the English law position.
• Shareholders will now be watching with interest when the Court of Appeal hears an appeal in Aabar later this year.
• For now, shareholders will want to ensure, where possible, that company advice is received expressly on a joint basis.
• Directors on the other hand, may be more comfortable obtaining privileged legal advice on behalf of the company.