Shareholder Privilege Rule

The UK Privy Council’s Judicial Committee has abolished the principle that a shareholder is entitled to seek disclosure of legal advice provided to the company, holding that it should no longer be recognised. Our Commercial Disputes team examines the decision and its implications for Irish law.

The Judicial Committee of the Privy Council is the final court of appeal for UK overseas territories and Crown dependencies. It remains the final court of appeal for those Commonwealth countries that have retained an appeal to the Privy Council. It is of broadly equivalent standing to the UK Supreme Court[1] and shares the same panel of judges.

Legal advice privilege entitles a recipient to refuse to disclose confidential communications subject to that privilege. However, it does not apply in the same way between companies and their shareholders. This exception is known as the ‘shareholder rule’ and it has also been recognised in Ireland. It entitled a shareholder to obtain such communications without the loss of the privilege, provided the advice did not relate to hostile litigation against them. The Privy Council has now decided that principle should no longer be the case in the UK, noting that the joint interest concept was not properly applicable and that it failed to recognise the separate legal personality of the company.[2] While it is not possible to be definitive, that position could potentially be adopted in Ireland.

Background and the ‘Shareholder Rule’

The ‘shareholder rule’ developed as a common law rule during the late 19th century. In effect, it meant that a company could not assert legal advice privilege against its shareholders or members unless that advice related to litigation against those shareholders. The rationale was that, as shareholders, the members had a proprietary interest in the assets of the company, which included legal advice. That rule developed prior to the recognition that companies had separate legal personality, as established in Saloman v. Saloman[3]. After that decision, the principle was subsequently justified on the basis of a joint interest in the legal advice shared by the company and its shareholders.

However, it has come under greater scrutiny over the years, culminating in the Privy Council decision under review. Before considering the factual background to the case, it is worth noting that in Aabar Holdings Sarl v Glencore plc & ors[4], the English High Court, in 2024, had held that the shareholder rule should be abolished. It certified a leapfrog appeal[5] to the UK Supreme Court. Permission was refused by the Supreme Court. This was on the basis that the Privy Council would imminently be dealing with the foundation of the rule and whether it should continue to be recognised as a matter of Bermuda, as well as English law. The case involved a company formed by the consolidation of two companies within the Jardine Matheson group in 2021. The shares in one company were cancelled. Under Bermuda law, the shareholders who dissented to the consolidation were entitled to receive fair value for the cancelled shares. However, some of them were not satisfied with the fair value determination and initiated a statutory mechanism requiring the court to decide on the value. As part of those proceedings, they sought disclosure of the legal advice obtained by the group regarding fair value. This raised the issue of the shareholder rule which progressed through the local courts to the Privy Council.

The decision

The written judgment reviewed the prior authorities and applicable statutory provisions and noted that although the original rationale for the ‘shareholder rule’ was proprietary, that was “wholly inconsistent with the proper analysis of a registered company as a legal person separate from its members such that the members have no proprietary interest in the funds of the company used to pay for the advice.”

As to the asserted joint interest, it was observed that “it cannot sensibly be said that there is always a community of interest between every company and its shareholders”. Also, it was noted that the interests of shareholders are not always aligned and they may diverge, even within the same class of shareholder – “Shareholders are simply not a homogeneous block with a single shared interest...” Consequently, when it came to looking at the type of relationships where joint interest privilege might apply, the Privy Council concluded:

“When the company shareholder relationship is looked at squarely on its own, it is clear that there is no, or at least no sufficient, analogy with those other relationships to justify its inclusion within the joint interest family of relationships.”

The Privy Council ultimately said it was satisfied that the ‘shareholder rule’ forms “no part of the law of Bermuda, and that it ought not to continue to be recognised in England and Wales either.” It commented that “only two advantages were its ancient lineage and its creation of a bright line” and that the these were outweighed by the disadvantages. The Privy Council then addressed whether the ruling here, ostensibly in respect of a Commonwealth jurisdiction, should also apply under English law. This would require a specific direction, the authority for which derived from a case called Willers v Joyce[6]. The Privy Council was satisfied to make such a direction. It said it was “firmly of the view that this decision should be regarded by courts in England and Wales as abrogating the Shareholder Rule for the purpose of litigation in those courts.” Therefore English, and not just Bermuda, law is also reflected by the finding in the case.

Irish law

Irish law recognises the ‘joint interest’ principle in cases involving the ‘shareholder rule’. In Carlo Tassara Assets Management SA v Eire Composites Teo,[7] a shareholder claiming company actions as oppressive was, in principle, entitled to disclosure of company legal advice regarding those actions. That decision was affirmed in Delappe v Brock[8], where a shareholder was allowed to view company legal advice before hostile proceedings were threatened or initiated. Although the Privy Council decision would be persuasive in Ireland, as it is expressly stated to represent English law, it is not binding on the Irish courts.[9] Moreover, the rule was applied in Ireland quite recently. That suggests that the rule is likely to prevail under Irish law unless and until it is successfully challenged.

Conclusion

The decision is important as it has broader implications than simply disapplying the ‘shareholder rule’ in Bermuda. In rejecting the two rationales underpinning the rule, the Privy Council made clear that its decision also reflected English law. Specifically, the rule was difficult to reconcile with separate legal personality, and the joint interest analogy was strained. It remains to be seen if Irish law on the ‘shareholder rule’ will change given it has only been recently applied. The Privy Council decision may prompt a suitable party to challenge the rule in Ireland. If successful, it may give companies and directors greater freedom to obtain legal advice. However, for shareholders, it may reduce transparency and limit opportunities to scrutinise and challenge company decisions.

For more information and expert advice on commercial disputes, contact a member of our Commercial Disputes team.

The content of this article is provided for information purposes only and does not constitute legal or other advice.

[1] And formerly the Judicial Committee of the House of Lords.

[2] Jardine Strategic Limited v. Oasis Investments II Master Fund Ltd (No.2)(Bermuda) & Others [2025] UKPC 34

[3] [1897] AC 22

[4] [2024] EWHC 3046 (Comm). Pickens J. in the Commercial Court had descried it as “unjustifiable” in modern times and that the joint interest rationale was not “supported… by authority nor warranted as a matter of principle.”

[5] An appeal direct to the Supreme Court, avoiding the interim, and usual, appeal to the Court of Appeal.

[6] Willers v Joyce (No 2) [2016] UKSC 44 – addressing the status of Privy Council decisions as a matter of English law and, where the Privy Council considers English law to be wrong, it may “expressly direct that domestic courts should treat the decision of the JCPC as representing the law of England and Wales.” This was what was done here.

[7] [2016] IEHC 103

[8] [2023] IEHC 318

[9] See, for example, Bank of Ireland v Murray [2025] IESC 24; Phoenix Rock Enterprises v Hughes [2025] IEHC 126