The Privy Council's landmark decision in Jardine Strategic Ltd v Oasis Investments II Master Fund Ltd ([2025] UKPC 34) to abolish the Shareholder Rule has sparked extensive legal analysis, but this article takes a different path. Rather than dissecting technicalities, we explore the ruling's broader impact on corporate governance, shareholder dynamics, and strategic decision-making, offering a thought-leadership perspective on how this shift reshapes the balance between corporate autonomy and accountability in today's activist-driven landscape.
The Fall of the Shareholder Rule: But what does it mean?
In the rapidly evolving landscape of corporate law, the Judicial Committee of the Privy Council's decision in Jardine Strategic Ltd v Oasis Investments II Master Fund Ltd ([2025] UKPC 34) stands as a landmark ruling that reshapes the boundaries of legal professional privilege. Whilst many firms have already dissected the case's technicalities, this piece takes a broader view: exploring the historical roots of legal professional privilege, the significance of abolishing the long-standing “Shareholder Rule,” and its practical implications for businesses, shareholders, and corporate governance. As a thought-leadership reflection, I weigh the real-world advantages and disadvantages, drawing on how this decision could influence strategic decision-making in an era of heightened shareholder activism.
A High-Level Overview of the Case
The dispute originated in Bermuda, where Jardine Strategic
Holdings Ltd (part of the Jardine Matheson group) amalgamated with
another entity in 2021, offering minority shareholders US$33 per
share. Dissenting shareholders, dissatisfied with the valuation,
sought a court appraisal and demanded access to the company's
privileged legal advice on the fair value determination. Relying on
the Shareholder Rule, a doctrine dating back over 140 years, the
shareholders argued they had a right to inspect this advice, as it
was funded by company assets they indirectly owned.
The Privy Council unanimously rejected this, abolishing the
Shareholder Rule entirely. The Board declared it “altogether
unclothed,” like the emperor in the folktale, finding no
valid justification in modern company law. This ruling not only
applies in Bermuda but, via a Willers v Joyce direction, arguably
binds English courts, ensuring uniformity in common law
jurisdictions.
The Historical Evolution of Legal Professional Privilege
The origins of legal professional privilege date back centuries,
rooted in the need to foster trust between clients and lawyers. The
earliest recorded English case, Berd v Lovelace (1577), protected a
solicitor from testifying about client matters, emphasising the
“oath and honour” of the legal profession. By the 19th
century, as articulated in Greenough v Gaskell (1833), legal
professional privilege was seen as essential to justice: without
it, clients would withhold information, fearing exposure, and the
legal system would falter.
In common law jurisdictions, legal professional privilege evolved
into two branches: (i) Legal advice privilege: covering
confidential communications for obtaining or giving legal advice;
and (ii) litigation privilege: protecting materials prepared in
anticipation of adversarial proceedings.
The Shareholder Rule emerged in 1888 with Gouraud v Edison Gower
Bell Telephone Co, analogising shareholders to trust beneficiaries
with a proprietary interest in company assets, including legal
advice paid for with those funds. This exception persisted largely
unchallenged until modern critiques, influenced by Salomon v
Salomon (1897), which solidified corporate separate personality.
Recent cases like Various Claimants v G4S Plc (2023) and Aabar
Holdings SARL v Glencore Plc (2024) questioned its foundations,
paving the way for Jardine. The Privy Council rejected proprietary,
joint-interest, and case-by-case formulations, prioritising
certainty and candour in legal advice.
This history underscores the role of legal professional privilege
as a “fundamental human right,” enabling full
disclosure without fear. Yet, as Jardine shows, its application
must adapt to contemporary corporate realities.
Real-Life Advantages and Disadvantages of the Decision
The abolition of the Shareholder Rule aligns legal professional privilege with modern principles like corporate separateness, but it also raises questions about shareholder protections. Below, I outline key pros and cons in practice, based on implications for directors, companies, and investors.
Corporate governance and decision-making
Advantage: Directors can seek candid, confidential advice without fearing shareholder scrutiny, reducing hesitation in complex restructurings or valuations. This promotes efficient management and aligns with the separate legal personality of companies.
Disadvantage: May embolden boards to withhold critical information, potentially exacerbating agency problems where directors prioritise self-interest over shareholders.
Litigation and Dispute Resolution
Advantage: Companies gain a “fundamental right” to assert legal professional privilege in share- holder disputes, streamlining defences and reducing discovery burdens.
Disadvantage: Shareholders face barriers to evidence, making it harder to challenge valuations or misconduct, especially in appraisal proceedings or minority buyouts. This might increase litigation costs as parties battle over alternative proofs.
Shareholder Rights and Transparency
Advantage: Reinforces investor confidence by ensuring companies are not deterred from seeking advice, indirectly benefitting long-term shareholders through better-informed strategies.
Disadvantage: Could erode transparency in conglomerates like Jardine Matheson, where minority shareholders already feel marginalised, potentially fueling activism or regulatory calls for reform.
Broader Legal System Implications
Advantage: Enhances certainty, directors know advice is protected encouraging proactive legal consultation and upholding legal professional privilege's core purpose of candid communication.
Disadvantage: Risks overprotection of corporate secrets, hindering truth seeking in disputes and clashing with public interest overrides (e.g., under anti-money laundering laws).
In practice, advantages shine in high-stakes corporate actions: post-Jardine, boards can navigate mergers or valuations with greater assurance, fostering innovation and risk-taking. However, disadvantages loom for minority shareholders, who may now rely more on public disclosures or indirect evidence, potentially widening power imbalances in activist-driven environments.
Balancing Privilege and Accountability
This decision marks a pivotal shift towards corporate autonomy, but it invites reflection on equity. In an age of ESG scrutiny and shareholder empowerment, abolishing the Shareholder Rule could inadvertently shield poor governance. Yet, it reaffirms legal professional privilege's essence. For leaders, the takeaway is clear: prioritise robust internal processes to build trust, lest regulatory backlash ensues. As common law evolves, watch for appeals (e.g., in Aabar v Glencore) that might refine this balance.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
