- Written by
- Anahita Zandi, Solicitor
For over a century, there was a legal rule that allowed shareholders to see a company’s private legal advice in certain types of disputes.
This was known as the “Shareholder Rule.” It was based on the old-fashioned idea that shareholders, as part-owners of the company, had a right to access anything the company paid for—including its lawyers’ advice. But in the Jardine Strategic Holdings v Oasis Investments case, the Privy Council decided that this rule no longer makes sense in today’s world. This case was a Privy Council case on appeal from the Court of Appeal of Bermuda but the decision was extended to cover England and Wales under a Willers v Joyce direction.
The court explained that companies are separate legal entities—they’re not just extensions of their shareholders. That means the company itself owns its legal advice, and shareholders don’t automatically get to see it, even if they’re challenging something like a merger or share valuation. The judges said the Shareholder Rule was outdated and confusing, and that it blurred the line between the company and the people who invest in it. They compared it to a situation where everyone pretends something is true even though it clearly isn’t—like “the emperor wearing no clothes.”
By scrapping this rule, the court made it clear that companies can keep their legal advice private, even when shareholders are suing them or asking the court to decide what their shares are worth. This decision protects companies’ ability to get honest legal guidance without worrying that it will be used against them later. For shareholders, it means they’ll need to rely on their own legal teams and evidence, rather than trying to access the company’s internal documents.
For further information on shareholder disputes, contact a member of our Dispute Resolution team on 020 8290 0440.