End of the shareholder rule: what companies and boards need to know

For decades, the longstanding principle known as the “shareholder rule” shaped corporate litigation. It allowed shareholders to access company documents protected by legal professional privilege.

This has now changed – with two recent case law developments reshaping the landscape for modern corporate litigation.

What was the “shareholder rule”?

Dating back to the late 19th century, the shareholder rule was rooted in the idea that shareholders have a proprietary interest in the company’s assets, including confidential legal advice paid for with company funds.

It permitted shareholders to inspect and access documents that might otherwise be withheld under legal privilege, preventing companies from claiming privilege against their own shareholders.

The rationale was that since shareholders effectively “own” the company, they have a proprietary interest in its assets – including a right to see legal advice purchased with company funds (unless such advice related to litigation between that shareholder and the company).

Aabar Holdings v Glencore: a turning point

On 27 November 2024, the High Court in Aabar Holdings delivered a landmark judgment: the shareholder rule simply does not exist in English law and “should no longer be applied”.

The dispute formed part of a broader securities class action brought by various investors, including Aabar, against Glencore and its former directors. The claim alleged that Glencore failed to disclose misconduct involving African and South American subsidiaries in its IPO prospectus and annual reports, in breach of sections 90 and 90A of the Financial Services and Markets Act 2000 (FSMA).

A key pre-trial issue was whether Glencore could claim privilege over certain documents against its own shareholders. Aabar Holdings argued that the shareholder rule prevented Glencore from doing so.

The judge held that, following the historic Salomon v A Salomon & Co Ltd case of 1897 – which affirmed the company as a separate legal person – shareholders no longer have a proprietary interest in company documents sufficient to override privilege.

The Bermuda perspective

While the position under English law seemed clearer, developments in offshore jurisdictions suggested a potentially divergent approach. In Oasis Investments II Master Fund Ltd v Jardine Strategic Holdings Ltd [2024], the Court of Appeal of Bermuda took a different stance.

In Jardine, a minority shareholder sought disclosure of documents in the context of a proposed merger. The company asserted privilege, but the court found in favour of the shareholders, ruling that privilege could not be maintained for documents created before the public announcement of the merger. The court leaned on the “joint interest” doctrine to justify its ruling.

This case was appealed and heard by the Judicial Committee of the Privy Council in March 2025.

Due to the appeal in this case, Aabar Holdings’ permission to appeal was rejected in February 2025 on the basis that the issues were likely to be resolved, or at least clarified, by the outcome of Jardine.

The Jardine decision

On 24 July 2025, the Privy Council in Jardine unequivocally abolished the rule in both Bermuda and, by extension, England and Wales. It emphasised the importance of preserving legal professional privilege and recognised the separate legal personality of companies.

The Privy Council declared that the shareholder rule “should be regarded by courts in England and Wales as abrogating the shareholder rule for the purpose of litigation in those courts.”

What this means for shareholders and companies

Both Aabar Holdings and Jardine are clear wins for companies and their directors. They can now enjoy much clearer and stronger protection over sensitive legal advice, enabling more confident and candid decision-making.

On the flipside, shareholders can no longer claim privileged legal communications simply due to their shareholder status. This places greater importance on having shareholder agreements in place that define access rights and manage expectations.