Shell’s chief executive and chief financial officer will be based in the UK under changes planned to ‘strengthen its competitiveness’ © REUTERS
Royal Dutch Shell plans to ditch its dual share structure and move its tax residence from the Netherlands to the UK in a historic shift that sparked divided reactions on each side of the North Sea.
The oil and gas supermajor, which is under fire from Wall Street activist investor Third Point, said on Monday that the move would “strengthen Shell’s competitiveness and accelerate both shareholder distributions and the delivery of its strategy to become a net zero emissions business”.
While Shell talked up its continued commitment to the Netherlands, describing the move as a necessary simplification, the Dutch government said it was an “unwelcome surprise” and was in “dialogue with the management of Shell over the consequences of this plan”. UK business secretary Kwasi Kwarteng celebrated the “clear vote of confidence in the British economy”.
Shell has been incorporated in the UK with Dutch tax residency and dual class shares since 2005. If the new plan is implemented, the group’s chief executive and chief financial officer will move to the UK, while “Royal Dutch” will be dropped from its name after 114 years.
Analysts said share buybacks could more than double, enhancing Shell’s ability to reward investors demanding increasingly high returns to hold oil and gas stocks.
Shell’s Dutch A shares are liable for a 15 per cent withholding tax, in effect restricting share buybacks to the UK B shares, which are subject to no such levy. Shell’s B share purchases each quarter are capped by regulators at 25 per cent of the average daily trading volume, or roughly $2.5bn.
Under the plans, Shell will still be listed in Amsterdam, London and New York but with a single line of shares, widening the pool to which the 25 per cent cap is applied and so allowing it to boost its buybacks.
“In the short term, the clear benefit is the lack of liquidity restrictions on Shell’s buyback programme,” said Biraj Borkhataria, an analyst at RBC Capital Markets, adding that repurchases could double to at least $5bn a quarter. Shell said it remained “proud of its Anglo-Dutch heritage” and that several divisions, including its global upstream business, would remain located in The Hague.
Nevertheless, it has had recent complications in the Netherlands. Last month Dutch pension fund ABP said it was selling its entire holdings in fossil fuel companies, including a significant stake in Shell. The group is also appealing against a court order in The Hague in May to accelerate its emissions reductions.
Shell chair Andrew Mackenzie insisted the restructuring would have “no impact” on the Dutch legal proceedings.
“The simplification will normalise our share structure under the tax and legal jurisdictions of a single country and make us more competitive,” he said.
The announcement comes a month after Third Point said it had built a stake in Shell and urged it to split to deliver better value through the energy transition.
Shell said it had always intended to simplify the share structure, a legacy of the 2005 merger of Koninklijke Nederlandsche Petroleum Maatschappij and the Shell Transport and Trading Company — adding that the proposal was part of a long-term reorganisation.
Shareholders will be asked to vote on the changes at a general meeting on December 10.
The company’s shares were up almost 2 per cent in lunchtime trading in London.
Additional reporting by Oliver Ralph
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