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 sharply 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 a single class of shares would make buybacks easier and suggested acquisitions and disposals would be simpler as it pivots towards cleaner energy.
But the move also has sharply differing implications for the UK and the Netherlands. The Dutch government said it was an “unwelcome surprise” and was in “dialogue with the management of Shell over the consequences of this plan for jobs, crucial investment decisions and sustainability”. UK business secretary Kwasi Kwarteng celebrated the “clear vote of confidence in the British economy”.
The group has been incorporated in the UK with Dutch tax residency and dual class shares since 2005. If the new plan is implemented, the tax residency will move to the UK and the group’s chief executive and chief financial officer will also move countries. The “Royal Dutch” will be dropped from Shell’s name after 114 years.
“The simplification is designed to strengthen Shell’s competitiveness and accelerate both shareholder distributions and the delivery of its strategy to become a net zero emissions business,” Shell said on Monday.
Under the plans, Shell will still be listed in Amsterdam, London and New York but will have a single line of shares rather than the previous A and B share structure.
“Shell is proud of its Anglo-Dutch heritage and will continue to be a significant employer with a major presence in the Netherlands,” it said, adding that several divisions, including its global upstream business, would remain located in The Hague.
Shell’s recent history in the Netherlands has had complications. In May, a court in The Hague ruled that Shell needed to reduce its carbon footprint faster and ordered it to cut more emissions by 2030. Shell has said it will meet most of the court’s targets but is also appealing against the decision.
Shell chair Andrew MacKenzie insisted the restructuring would have “no impact” on the legal proceedings. “Shell is rising to meet the court’s challenge and has recently announced a new absolute emissions reduction target.
“The simplification will normalise our share structure under the tax and legal jurisdictions of a single country and make us more competitive,” MacKenzie said. “As a result, Shell will be better positioned to seize opportunities and play a leading role in the energy transition.”
The announcement comes a month after Third Point said it had built a stake in the company and urged the energy major to split into different companies 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 plan.
Shareholders will be asked to vote on the changes to Shell’s articles of association at a general meeting on December 10.
MacKenzie said the proposal had the unanimous backing of the board, adding that “benefits of the simplification will outweigh any potential costs associated with it”.