Late last year, the High Court made a bold decision which suggested that the long-standing “shareholder rule” had no real basis in English law. That uncertainty has now been resolved. In Jardine Strategic Limited v Oasis Investments and others, the Privy Council has confirmed that the shareholder rule should no longer be recognised in England and Wales.

In reaching its decision, the Privy Council has dispelled uncertainty in this area of law and reinforced the core principles of both modern company law and legal professional privilege.

What was the shareholder rule?

The shareholder rule was a principle dating back to the 1800s. It provided that a company could not, during litigation with a current or former shareholder, rely on legal advice privilege against that shareholder. In practice, this meant shareholders were entitled to see a company’s legal advice, unless the advice was specifically generated in the context of actual or contemplated litigation with them.

This approach stood apart from the general rule of privilege and had been applied in case law for over a century.

Thie High Court decision in Aabar v Glencore

In November 2024, the High Court in Aabar Holdings SARL & ors v Glencore PLC & ors [2024] EWHC 3046 (Comm) held that the shareholder rule was “unjustifiable and should no longer be applied”. Although a leapfrog appeal to the Supreme Court was granted, the Supreme Court declined to hear it, noting that the same issue was due to be considered in the Jardine case before the Privy Council.

This left companies and shareholders in a state of uncertainty until now.

The Privy Council decision in Jardine

Hearing an appeal from Bermuda, the Privy Council (made up of UK Supreme Court justices) confirmed that:

• The shareholder rule forms no part of Bermudan law.
• It should not continue to be recognised in England and Wales either.

The Board found that the historical justification for the rule – that shareholders had a proprietary interest in company assets, and therefore in the legal advice paid for by the company – was inconsistent with modern company law principles. A company is a separate legal entity, and its shareholders do not own its assets.

The scope of joint interest privilege

The Board also rejected the argument that shareholders automatically share a “joint interest” in a company’s legal advice. Shareholders’ interests often diverge – both from one another and from the company itself. Directors are required to act in the best interests of the company as a whole, balancing stakeholder interests, including employees, creditors, and others. For that reason, directors must be able to obtain “candid, confidential legal advice” without fear of later disclosure to shareholders.

The Board further emphasised the need for certainty. Directors should know, at the time advice is sought, that privilege will be preserved.

Although Privy Council decisions are not normally binding in England and Wales, this case is an exception. The Board issued a Willers v Joyce direction, making it clear that English courts should treat the decision as abrogating the shareholder rule.

This outcome is consistent with the Supreme Court’s decision not to hear the Aabar appeal, given the overlap of issues.

Why does this matter?

This ruling brings welcome clarity for companies and shareholders alike:

• For companies: Legal privilege is preserved. Businesses can obtain advice in confidence, knowing it cannot be demanded by shareholders in the course of litigation.
• For shareholders: Access to documents may still arise, but only under specific contractual rights (such as shareholder agreements or company articles), rather than under a blanket principle.
• For the wider legal system: The decision reinforces a core tenet of privilege – that parties must be free to seek legal advice without fear of later disclosure.

Funding shareholder litigation

Shareholders can no longer rely on automatic access to a company’s privileged legal advice, meaning the tactical and financial considerations for pursuing claims have changed, especially when it comes to funding.

Fortunately, there are funding and insurance options available to help you conduct litigation in a cost-effective manner. These include:

Third party funding 

One funding method that is commonly used for shareholder disputes is third party funding. Third party funding acts as a form of non-recourse financing for litigation. Third party litigation providers take on the financial risk of litigation so that clients can pursue a claim without having to worry about the legal fees associated with it.

In return for taking the risk, the litigation funder will typically seek a share of the proceeds in the region of a fifth to a third of any damages recovered. This means that you keep up to 80% of the reward, having taken none of the risk. If the claim is unsuccessful, the funder will lose their investment. 

Damages based agreement 

A damages based agreement (DBA), also known as a contingency fee agreement, is a type of arrangement made between a client and a solicitor in which the solicitor agrees to fund their case and share the risk of litigation. In return, the solicitor will be paid a percentage sum of the damages recovered as long as the client’s case is successful.

DBAs provide that, instead of being paid on a conventional hourly rate, the solicitor’s legal fees are only payable in the event that the case is successful. Therefore, these types of agreements allow clients the opportunity to pursue a case without having to worry about the solicitors’ fees associated with it. In some circumstances, however, fees for Counsel and other disbursements may still be payable by the client. 

ATE insurance

After the event (ATE) legal expenses insurance is taken out after the event that has led to a dispute has taken place to protect you in the case of your claim being unsuccessful. ATE insurance can protect you from paying your opponent’s legal costs, should your claim not be successful.

However, ATE insurance is not free, and it is important to remember that if your case is successful, you may have to use some of your reward to pay the cost of the insurance premium, which will be included in the terms and conditions.

The use of third-party litigation funding, CFAs and ATE insurance can sound complicated, but they are simply risk management tools and when used correctly, they can make all the difference to a partnership or shareholder dispute case.

How can Annecto Legal assist?

Obtaining the right guidance early – without incurring unnecessary legal fees – is often the most effective way to protect your position and manage costs.

Annecto Legal helps clients understand the value of their shareholder disputes and explores practical ways to fund and manage litigation. We work closely with litigation funders, insurers, and legal teams to provide alternatives to traditional hourly-rate funding models.

Contact an expert member of our team to discuss the most suitable litigation funding options for your situation and reduce the commercial and financial risks associated with shareholder disputes.