In a landmark 2024 decision, the High Court in Aabar Holdings S.à.r.l. v Glencore PLC & Ors [2024], reshaped the legal landscape for shareholder disputes by rejecting the long-standing but inconsistently applied “Shareholders Rule.” This ruling has significant implications for corporate transparency, litigation strategy and shareholder rights.
Background
Aabar Holdings S.a.r.l. (Aabar) bought a claim against Glencore PLC (Glencore) & several individuals alleging misconduct by Glencore Group subsidiaries in parts of Africa and South America. Aabar said that because of the alleged misconduct, certain documents issued by Glenocre contained misstatements and / or omissions.
In the lead up to the first Case Management Conference (a hearing to address procedural steps), a key issue arose: could Glencore assert legal privilege over documents requested by Aabar? This brought the so-called “Shareholder Rule” into question.
Legal Advice Privilege
Legal advice privilege protects confidential communications between a lawyer and their client, made for the purpose of giving or receiving legal advice.
What is the Shareholders Rule?
Historically, the Shareholder Rule had been used in disputes where a company could not withhold legally privileged documents from their shareholders. The basis for this was that Shareholders, as owners of the Company, were entitled to access information on how the Company was being run – including all legal advice obtained by the Company.
This rule was never firmly established in English law and had been applied inconsistently. The case of Aabar has clarified that no general rule exists.
The High Court’s decision
The Court ruled that companies are entitled to assert legal privilege against their shareholders. In this case, Glencore was permitted to withhold privileged documents from Aabar. This decision now means that shareholders do not have an automatic right to access privileged legal communications, even in the context of litigation.
Implications of this ruling on corporate litigation
1. Corporate defence
Companies now have firmer legal grounds to protect sensitive communications with legal advisors, even in disputes with shareholders.
2. Reduced transparency
Shareholders may now face increased difficulty in accessing internal documents, potentially limiting their ability to hold companies / directors accountable.
3. Potential for review
Given the significance of this ruling, it may be subject to further judicial review, particularly from a shareholder rights perspective.
Impact on companies and shareholders
This decision provides companies with a stronger shield against disclosure in litigation. However, responsible corporate governance remains essential. Companies should continue to promote transparency through other channels to maintain trust and accountability.
For shareholders, this ruling highlights the importance of:
- Reviewing shareholder agreements
- Understanding the limits of access to company information
- Seeking early legal advice in the event of a dispute
Should a shareholder dispute arise, seeking advice from experienced commercial litigation solicitors can help you navigate the legal complexities, protect your interests, and resolve matters efficiently.
How can Nelsons help?
Anika Zahid is an Associate in our Dispute Resolution team, specialising in commercial litigation and professional negligence claims.
If you would like advice in relation to the points raised in this article, please contact Anika or another member of the team in Derby, Leicester, or Nottingham on 0808 258 0461 or via our online form.
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