When shareholders go into business together, expectations and goals often align. But disagreements can – and do – happen which can leave business owners and their businesses at odds.
Until now, a ‘shareholder rule’ has been in place which has enabled shareholders to obtain access to legal advice belonging to the company, but a recent judgment from the Privy Council has scrapped the rule.
Jared Martin, Solicitor in Thrings’ Commercial Dispute Resolution team, takes a look at the decision, what it means for shareholders of UK businesses and what they should consider as a result.
Jardine Strategic Ltd v Oasis Investments II Master Fund Ltd
On 24 July 2025, the Judicial Committee of the Privy Council delivered a landmark judgment abolishing the so-called “shareholder rule” – a long-standing exception that allowed shareholders to pry into legal advice held by their company.
Historically, the rule existed because shareholders were thought to have paid for the advice via their ownership. Over time, a “joint-interest” justification emerged – assuming shareholders and the company shared aligned interests. The Privy Council rejected both:
The case related to the merger of Jardine Strategic Holdings Ltd and JMH Bermuda Ltd, creating a new entity and cancelling the shares of the previous company, with shareholders receiving a “fair value” payout for their investment.
More than 80 dissenting shareholders took the matter to the courts to seek the true value of their shares, demanding disclosure of legal advice that the company had obtained when deciding on the valuation through invoking the “shareholder rule”.
Having been through the Supreme Court of Bermuda and Court of Appeal, the case found itself before the Privy Council, who decided that shareholders cannot compel disclosure of privileged legal advice based on the rule, effectively scrapping it.
The court considered the shareholder rule to run counter to modern company law that views a company as a separate legal person and that the fact shareholders often have diverging interests.
Why this matters to shareholders
Shareholder disputes can arise in a wide range of ways, from conflicts over direction and decisions, disagreements about profit-sharing or breaching of agreements to suspicions of misconduct and exclusion from information. Whatever the case, such disputes can often result in legal action.
This ruling shifts the balance with shareholders engaging in a dispute no longer able to demand access to the previously acquired legal advice if the company assert legal privilege.
For shareholders seeking redress, it’s a setback, but for company directors, it’s a win as they can now seek honest legal advice with confidence, without fear that such advice may later come back to haunt them in litigation.
What should businesses consider doing to avoid or manage shareholder disputes?
Jared Martin, Solicitor in Thrings’ Commercial Dispute Resolution team, said: “Whether you face a clash over strategy, feel excluded from key decisions, or worry about dividend fairness, knowing your rights and risks matters.
“With the shareholder rule gone, companies are more secure in being able to withhold legal advice even when facing shareholder litigation. This means shareholders have lost a key access point, while directors gain clarity and confidence in obtaining legal advice.
“As such, proactive governance is more important than ever so shareholders should ensure their share documentation and agreements are all up-to-date and ensure all parties are covered in case of a dispute. It’s essential to remember that prevention is better than cure.”
Thrings’ Commercial Dispute Resolution lawyers have an outstanding track record in achieving success in court, also offering expertise in mediation, pre-action work, settlement negotiations and arbitration to deliver commercially focused solutions to minimise disruption to your business. Contact us to find out more.