Shell moves to UK and ditches ‘Royal Dutch’ name amid lengthy tax dispute and activist pressure
Royal Dutch Shell is moving its headquarters, top executives, and crucially, its tax residence from The Hague to the UK.
The move prompted the Dutch government to overhaul a controversial dividend tax which the energy giant had cited as a reason to unify its share structure and shift bases, according to the Financial Times.
Shell is also establishing its CEO, CFO and board meetings in the country.
The Anglo-Dutch oil titan is scrapping its dual-share structure which it has used since 2005, and is ditching the royal designation it has enjoyed for 114 years.
It will now be known simply as Shell.
The multinational firm is overhauling the business to make it “simpler for investors to understand and value”.
Consequently, it is binning its dual-share structure and introducing a line of single shares in the UK making .
The single larger single pool of ordinary shares should accelerate its distributions and buybacks.
Shell previously announced its $2bn buyback programme in July.
It has pledged to return $7bn to shareholders after its sale of Permian assets in the US is completed.
A deal was reached for a $9.5bn sale to ConocoPhillips in September.
The radical measures follow a long-running dispute with the Dutch authorities over the country’s 15 per cent dividend withholding tax on some of its shares.
While Chancellor Rishi Sunak looks set to increase corporation tax from 19 per cent to 25 per cent, Shell’s shares will now be safe from the Dutch dividend tax.
Shell will remain listed in Amsterdam, London and New York, but will essentially be a UK-based company.
The company’s chair, Sir Andrew Mackenzie said: “The simplification will normalise our share structure under the tax and legal jurisdictions of a single country and make us more competitive. As a result, Shell will be better positioned to seize opportunities and play a leading role in the energy transition.”
He said that Shell’s board unanimously approves of the changes and recommends shareholders vote in favour of the resolution.
Economic affairs and climate minister Stef Blok said the Dutch government was “unpleasantly surprised” by the news.
Zoe Wyatt, partner at Andersen in the UK, argues the news should not have surprised anyone.
In particular, she pointed to the proposed exit tax bill being put forward in the Dutch House of Representatives after Unilever’s acrimonious departure in 2020.
There is uncertainty over the outcome of any upcoming vote on the bill but following an amendment it can’t be retrospectively applied, now is an opportune time to move elsewhere.
She said: “Since there is no retrospective effect, and there remains uncertainty as to how political parties will respond to the proposed bill, it makes sense for Shell to press the button on relocation. All the reasons for wanting to exit the Netherlands remain the same and if you are keen to do so, now is the time.”
Russ Mould, investment director at AJ Bell told CityAM Shell’s decision reflected growing trends in the industry, and did not see the move as a surprise due to long-running tax issues between Shell and the Dutch government.
He said: “The move to simpler corporate structures, either operationally, financially or both, seems to be a trend. Unilever has switched its HQ and primary listing to London, miner BHP is to focus on Sydney and now Shell is the latest firm to scrap a dual-share structure. Lower costs, greater flexibility and speed of movement for the board all seem to be considerations, as does the ability to return cash to investors more smoothly – Shell has long chafed against the 15 per cent withholding tax which applies in the Netherlands.
Alongside entrenched financial disputes, Shell has faced activist pressure from Wall Street raider Third Point.
The fund management company led by Daniel Loeb has taken a hefty stake in the corporation, and has since called for Shell to split-up its empire.
CityAM approached Third Point following Shell’s announcement, but the group declined to comment.
Shell has also faced sustained pressure from environmentalists.
The energy giant was taken to the Hague earlier this year and was ordered by a judge to reduce its emissions by 45 per cent by 2030.
Court proceedings were brought by seven parties including activist groups like Greenpeace and Friends of the Earth, but it has also been facing pressure from within its own industry.
The company reported surprisingly underwhelming financial results last month, with revenues dropping 25 per cent to $4.1bn in its third quarter unaudited results.
The company’s shares are up 1.24 per cent on FTSE 100 following the results .
The relocation and share structure decisions remain subject to a shareholder vote.