Shell abandons the Dutch and moves to London for a share structure overhaul

Royal Dutch Shell announced Monday that it will scrap its dual share structure, and relocate its head office from the Netherlands to Britain. This was in response to Dutch taxes and climate pressure as the energy giant moves away from oil and gas.

Shell Plc will be the new name for the company that has long been subject to questions from investors regarding its dual structure.

Shell wanted to avoid the 15% withholding tax on dividends in the Netherlands, so the Anglo-Dutch firm was locked in a lengthy dispute with Dutch authorities. This issue would be resolved by the new structure.

ABP, the largest Dutch state pension fund, announced last month that it would eliminate Shell and all fossil fuels as a blow to relations with the Netherlands.

The Dutch government stated Monday that it was not surprised by Shell’s plans for London to be moved from The Hague.

Shell shares, which will continue to be traded in New York and Amsterdam under the plan, rose more than 2% in London Monday morning following the news.

Shell announced that its plan to alter its share structure was to “reduce complexity and make it more sustainable.”

Shell stated that at least 75% must vote in support of the move at a general meeting scheduled for Dec. 10.

We see merits in the proposed restructuring and alteration of Shell’s shares structure. Jefferies stated in a research note that the changes would increase Shell’s ability to buy back shares, among other benefits.

Monday’s action follows a major overhaul Shell did this summer in order to transition away from oil and natural gas and towards renewables and low-carbon energies. This overhaul saw thousands of job losses around the globe.

CLIMATE ACTION
A Dutch court ordered Shell in May to increase its greenhouse gas emission cuts to comply with the Paris climate agreement. This aims to limit global warming to 1.5 degrees Celsius. Shell said that it would appeal.

“If this decision allows the company to become more agile in order for it to execute its transition towards net zero, then that should be viewed positively,” Adam Matthews, chief investment officer at Church of England Pensions Board and a Shell shareholder, said.

Matthews is leading negotiations with Shell for Climate Action 100+. He said that it shouldn’t remove Shell from its responsibility to implement the Dutch court decision.

Shell is also resisting calls from Third Point, an activist investor, for the company to be split into several companies. Shell’s top executives retorted, arguing that the businesses work better together.

Shell stated that its new plan was designed to increase Shell’s competitiveness, accelerate shareholder distributions, and deliver its strategy to become a net-zero emission business.

Mark Rutte, the Dutch Prime Minister, and his coalition planned to eliminate the withholding tax for 2018. This was to preserve the headquarters of Shell and Unilever. Unilever is an Anglo-Dutch company that has now moved to London. The Dutch legislators opposed the move. Rutte warned that it could cause firms to move.

Unilever, a consumer products giant, abandoned its dual Anglo/Dutch structure last ye in favour of a single London-based entity.

With General Electric, Toshiba, and Johnson & Johnson announcing last week plans to separate their companies, corporate giants are being forced to simplify their structures.

Dual listings, which can be more costly to maintain, are also losing popularity. Like Unilever and Miner BHP, this structure has been deemed obsolete.


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