On 24th July 2025, the Privy Council delivered a landmark ruling in Jardine Strategic Limited v Oasis Investments II Master Fund Ltd that brought an end to the so-called “shareholder rule,” a principle that had restricted companies from asserting legal privilege against their shareholders. This decision marks a major shift in corporate law, particularly for directors, and calls for a reassessment of how legal advice is sought, shared, and protected within companies.
In this blog, we explore the implications of this ruling for directors and businesses in Central London and beyond, offering practical lessons to help you navigate this new legal landscape.
What Was the Shareholder Rule?
The shareholder rule, a principle rooted in Victorian-era law, stated that shareholders, as the ultimate owners of a company, had the right to access legal advice obtained by the company. The logic behind this rule was based on the idea that shareholders and the company shared a “common interest” in obtaining legal advice. Over time, however, the rule has become increasingly controversial, with courts questioning its validity in the modern corporate world.
In Jardine Strategic Limited v Oasis Investments II Master Fund Ltd (2025), the Privy Council decisively ruled that this rule should no longer apply, both in Bermuda and the UK, effectively putting an end to it.
What Happened in the Jardine Strategic Case?
The case revolved around a dispute involving two Bermudian companies, Jardine Strategic Holdings Ltd and JMH Bermuda Ltd, which merged to form Jardine Strategic Limited (JSL). After the merger, a group of institutional investors challenged JSL’s valuation of the shares, seeking access to the company’s legal advice. JSL resisted the disclosure, citing legal privilege.
The shareholders invoked the shareholder rule, arguing that they had a right to access privileged advice. However, the Privy Council ruled in favour of JSL, affirming that the company was not required to disclose privileged legal advice to shareholders.
In a bold move, the Privy Council declared that the shareholder rule should no longer exist in the UK, a declaration expected to shape corporate governance going forward.
Why Is This Ruling Significant for Directors?
The abolition of the shareholder rule has profound implications for how directors should manage legal advice and decision-making within their companies. Here are the key lessons for directors:
1. Legal Advice Is Crucial – And Now More Protected Than Ever
The ruling reinforces the idea that legal advice is vital for informed decision-making, especially in high-stakes situations like mergers, acquisitions, and disputes. Directors can now feel more confident that their legal advice remains protected under legal privilege, even when shareholders may have a vested interest in the outcome.
This means directors can freely seek legal counsel without fear of having to disclose confidential communications to shareholders, giving them the independence to make decisions in the company’s best interest, as required under sections 172 and 173 of the Companies Act 2006.
2. Directors Are Not Obliged to Share Legal Advice with Shareholders
One of the key takeaways from the ruling is that directors are not obligated to share legal advice with shareholders, unless it is required by law or needed to fulfill a specific statutory duty. While some companies may voluntarily disclose advice, directors should be cautious about doing so to avoid inadvertently waiving privilege.
Before sharing legal advice, directors should consider sharing high-level summaries, rather than detailed legal opinions, and ensure appropriate confidentiality measures are in place. By doing so, they can protect the integrity of legal privilege and avoid potential risks.
3. Director Decisions Must Be Defensible
Although the Jardine ruling was focused on legal privilege, it stemmed from a shareholder challenge over the fairness of a share valuation. This highlights a critical lesson for directors: any decision involving shareholder interests—such as mergers or buyouts—must be transparent, well-documented, and defensible.
While directors now have greater freedom to keep legal advice confidential, they must still ensure that their decisions are reasonable and justifiable. If a director cannot explain why a decision was made or demonstrate that it was based on sound legal and financial advice, they could face criticism or legal challenges.
What Does This Mean for Corporate Governance?
For directors and business leaders in London, the end of the shareholder rule is a significant development. It provides more autonomy and protection when making decisions that involve complex legal and financial matters. However, it also means that directors must remain vigilant and proactive in safeguarding privileged information.
This ruling also creates a new dynamic in the relationship between directors and shareholders. While shareholders retain important rights, their ability to access legal advice will be limited, potentially making it harder for them to challenge board decisions in the future. Directors, therefore, have more freedom but also more responsibility to make well-informed and defensible decisions.
Conclusion: Time to Review Your Corporate Governance Practices
The abolition of the shareholder rule is a game-changer for corporate governance. Directors now have clearer legal protections, which should empower them to act more independently and confidently when making key business decisions. However, with this new freedom comes the responsibility to ensure that decisions are well-documented, justifiable, and defensible against scrutiny.
For directors of companies in Central London, it may be a good time to review governance policies, particularly around the seeking, sharing, and safeguarding of legal advice. Ensuring that legal advice is appropriately sought and preserved will be key to maintaining corporate integrity and minimizing risk.
At EA Law, we specialize in providing expert legal counsel for directors and businesses navigating complex corporate governance issues. If you need guidance on how the Jardine Strategic decision impacts your company, don’t hesitate to get in touch with our team of legal experts at businesslaw@ealaw-solicitors.com