The case of Jardine Strategic Limited v Oasis Investments II Master Fund Ltd and 80 others (No 2) (Bermuda) [2025] UKPC 34 addresses significant issues regarding shareholder rights and legal professional privilege in corporate transactions. In particular, the case concerned the Shareholder Rule. This was a principle shareholders relied on to prevent companies from asserting privilege over documents, thus requiring companies to hand privileged documents over to them. On 24 July 2025, the Privy Council unanimously held that the Shareholder Rule no longer applies. Although the case concerned the law of Bermuda, the Privy Council issued a declaration (known as a Willers v Joyce direction) that its decision is binding on English courts as well. In so doing, it overturned an aspect of English law in force for almost 140 years.
The full judgment can be found here.
Background
Jardine Strategic Limited (the "Company") was formed from the amalgamation of Jardine Strategic Holdings Ltd ("Jardine Strategic") and JMH Bermuda Ltd, both within the Jardine Matheson group. The amalgamation led to the cancellation of all the shares in Jardine Strategic, requiring the Company to pay a fair value for the cancelled shares to shareholders. Dissatisfied minority shareholders initiated legal actions under the Bermudan Companies Act 1981.
Legal Professional Privilege and the Shareholder Rule
The primary legal issue before the Privy Council was whether the shareholders could access legal advice given to the Jardine Matheson group regarding the fair value of shares. The Company claimed legal professional privilege over the advice, while the shareholders argued for an exception based on the Shareholder Rule.
Legal professional privilege is a fundamental right under English law, protecting confidential communications between lawyers and clients. It ensures a client can obtain candid legal advice and produce documents reflecting that advice, knowing they will be protected from disclosure.
Before the judgment, the Shareholder Rule allowed shareholders to access legal advice paid for by a company, unless they were created for the dominant purpose of litigation between the company and the shareholders. The rule was originally justified on the basis that shareholders had a proprietary interest in the company's assets. Over time, the justification shifted to a joint interest privilege, aligning the interests of shareholders and the company.
The Privy Council's Decision
The Privy Council examined whether the Shareholder Rule should apply in Bermuda and, by extension, in England. The proprietary basis for the Shareholder Rule was found to be inconsistent with modern corporate law, which views companies as separate legal entities from their shareholders. The Privy Council also rejected the notion that all shareholders automatically share a joint interest, highlighting the fact that shareholders often have different interests among themselves, particularly if there are different classes of shares. Consequently, the Privy Council rejected the automatic application of the Shareholder Rule, emphasizing the need for certainty in legal privilege.
Practical Implications
The judgment marks a significant shift in the approach to shareholder rights and legal privilege in corporate settings, clarifying the status of the Shareholder Rule which we expect will be well received by company directors and in-house counsel. The ruling also re-emphasises a fundamental principle of company law, that a company is a separate legal entity from its shareholders. Shareholders will now be treated like any other party considering litigation against a company, with privilege only being lost in certain established circumstances.
Companies and in-house counsel should review and monitor their privilege management practices, especially if shareholder dissent is probable. Any privileged material should be carefully managed by the directors and in-house counsel. Given that minority shareholders can no longer rely on the Shareholder Rule to obtain privileged documents, they should ensure suitable governance practices are in place, for example by appointing nominee directors.
This judgment may open the door for further analysis and potential reform in shareholders' rights and corporate law, with likely implications for corporate governance and shareholder litigation. Companies, directors, in-house counsel and other stakeholders should monitor developments and adapt their practices accordingly.
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