The recent High Court decision in Aabar Holdings SARL v Glencore PLC has reshaped the contours of legal privilege in English law, decisively rejecting the so-called “shareholder rule.” Here, Solicitor William Appleyard looks at what the new ruling means for shareholders and corporate boards.
Traditionally assumed to grant shareholders an automatic right of access to a company’s privileged documents, that rule had been rooted in the belief that shareholders held a proprietary interest in the company’s assets. Mr Justice Picken’s judgment, however, aligns the law firmly with the principle established in Salomon v A Salomon & Co Ltd that a company possesses its own legal personality, distinct from its shareholders, and thus retains the right to withhold privileged communications from those shareholders. By emphasising that any “joint interest” between a shareholder and a company is a factual, context-specific inquiry, the ruling overturns more than a century of precedent and challenges litigation strategies that relied heavily on compelling disclosure.
Critics of the decision argue that it removes an important tool for shareholders who need to scrutinise board decisions or challenge company misconduct. In their view, the loss of guaranteed access to privileged materials imposes a heavier evidential burden on claimants, potentially hindering actions aimed at ensuring transparency and accountability. Supporters, however, maintain that the High Court has rightly confirmed the sanctity of privilege for corporate boards and their legal advisers, allowing them to seek and receive candid advice without fear of automatic disclosure to shareholder claimants. This more modern approach, they suggest, strikes a healthier balance between corporate confidentiality and shareholder rights, particularly given the range of existing legal avenues through which shareholders can investigate potential wrongdoing.
Whether the ruling strikes the correct balance remains to be tested on appeal. For now, corporate boards can take comfort that their privileged communications stand on firmer legal ground, while prospective litigants must recalibrate their strategies in light of a narrower evidential path to challenging board decisions. If your company is facing shareholder disputes or you are seeking guidance on how best to navigate privilege issues, our team is here to provide clear, tailored advice: [email protected].