Legal advice for a company: Is a shareholder entitled to read it?

It is has historically been held by the courts that a shareholder of a company has the right to access privileged legal advice held by the company — based on the idea that shareholders have a proprietary interest in company assets. This was known as the “shareholder rule”.

The end of the road for the shareholder rule?

Earlier in the year JMW partner Claire Brown wrote about the Glencore Case and what that High Court decision meant for the so-called shareholder rule.

Essentially in that case, the court decided that a company can assert privilege over certain documents which would make it more difficult for a shareholder to obtain those documents. Within Claire’s commentary, she noted that the decision was unexpected and that it marked a significant shift in the legal landscape. Claire also mentioned that the decision could be appealed, and we understand that there is currently an appeal.

However, the UK Supreme Court sitting as the Judicial Committee of the Privy Council (the “Board”) recently handed down judgment in Jardine Strategic Limited v Oasis Investment Fund Ltd and 80 others No2 [2025]. The Board was asked to consider two appeals 1) whether the shareholders were entitled to seek a determination of fair value for their shares from the court and 2) whether the shareholders could have access to legal advice obtained by a company in which they held shares, setting the fair value of their shares at $33 each. This blog will only consider the second appeal.

What is privilege?

Legal advice privilege is the ability to withhold the production of documents to other parties and / or the court where those documents generally meet the criteria of being (i) confidential communications, (ii) passing between a client and their lawyer(s) and (iii) come into existence for the sole or dominant purpose of giving or receiving legal advice.

In the context of this appeal, privilege is to protect legal advice received by Jardine Matheson Group. The general rule is that the opposing party is not entitled to inspect, documents when the dominant purpose is to provide legal advice. There has been one exception and that is the so-called shareholder rule, when a company cannot withhold documents from its shareholders on the grounds that the documents are covered by legal advice privilege.  

Background

Two companies were amalgamated namely Jardine Strategic Limited (the “Company”) and JMH Bermuda Limited. The result of the amalgamation was that the shares in the Company were cancelled, and the Company was required to pay the shareholders who owned the cancelled shares a fair value – the fair value was calculated to be $33 per share.

In this case, the UK Supreme Court was asked by the shareholders to determine whether they could have access to the legal advice that the Company received when determining that the fair value of the shares was $33.

There was a complication, in that the shareholders knew that the Company was to be amalgamated when they purchased their shares.

The court noted that the shareholders had accepted that legal advice received pre-amalgamation of the companies would ordinarily be protected by legal advice privilege. They rely on the so-called Shareholder Rule.  

Helpfully, the court did explain that the shareholders accept that once litigation is contemplated, privilege protects the documents, and they also accept that a shareholder is not entitled to inspect company documents whenever they wish to. Therefore, the issue is narrow, the appeal is specifically about inspection of documents valuing the shares i.e. prior to litigation.

What did the court decide?

As this was a case that originated in Bermuda, the Board stated that the shareholder rule shouldn’t exist in Bermuda, but then the court went further and said it shouldn’t exist in England and Wales either.

“The status-based automatic Shareholder Rule is therefore now, and in truth has always been, a rule without justification. Like the emperor wearing no clothes in the folktale, it is time to recognise and declare that the Rule is altogether unclothed.”

This means that the shareholders were not automatically entitled to inspect the Company’s privileged documents.

A key part of the Board’s rationale in reaching this conclusion appears to have been that a company should be treated as a separate legal entity to its shareholders.

Does it apply to England and Wales?

The court decided that the decision should be regarded as abrogating the shareholder rule in England and Wales, it is therefore a binding decision on English law.

Comment

Although this was a Bermuda ‘board’ decision, all of the judges were justices of the Supreme Court and they expressly stated that the shareholder rule should be done away with. Therefore, we can assume that the shareholder rule no longer exists in English law.

This means that company directors are entitled to withhold legal advice obtained by the company from shareholders. This may be a relief to directors who feel they can act with sufficient independence, autonomy and in the best interests of the company.

However, it will undoubtedly cause some concern and be a surprise to many shareholders who would consider that they should be entitled to the legal advice of a company which they in effect ‘own’. 

It will be interesting to see when and if the Glencore case is appealed and what the court decides. However, there is very clear guidance now to suggest that the shareholder rule no longer exists, and it may be expected that an appeal of Glencore will now follow the guidance in the Jardine Strategic case.

Therefore, shareholders wanting to ensure that they have full access to the company’s information (including legal advice it receives) will need to consider alternative means of ensuring this such as through shareholders agreements and articles of association that allow access or becoming a director of the company.