Shell, the Anglo-Dutch oil and gas firm currently incorporated as a public limited company in the UK, is planning to relocate its headquarters from the Netherlands to the UK.
The company’s full current name is Royal Dutch Shell plc. However, the relocation will also see the words ‘Royal Dutch’ be dropped. The move will be subject to a shareholder vote on whether to shift tax residence
The move is designed to simplify dividend payments
Relocation and simplification of corporate and share structure will reduce the friction of financial operations and activities such as equity raises, demergers, (where a company removes a subsidiary from its holding brand) and share buybacks.
The move will also remove the need to operate with two boards, further reducing cost and increasing the efficiency and speed of corporate decision-making.
Currently, the company offers two share types, a Dutch share and a UK share, and this complicates taxes on payments made to shareholders. Shifting tax residence to one of the two nations will greatly simplify taxes for shareholders.
Shell also claims that its relocation will strengthen its competitiveness and accelerate the company’s move toward net-zero emissions goals. Sir Andrew Mackenzie, chairman of Shell, stated: “At a time of unprecedented change, it’s even more important we have an increased ability to accelerate the transition to a lower-carbon global energy system.”
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Shareholders have demanded the move for years
The company’s Anglo-Dutch roots can be traced to a merger in 1907, between Shell Transport & Trading and Royal Dutch Petroleum. The merger was unconventional as both firms continued to operate independently. Both firms had separate boards of directors and this meant the company operated without a CEO, instead select directors from both boards formed a committee with a chairman.
In January 2004, Shell admitted it had overstated its oil reserves by 3.9 billion barrels or 20%. The revelation expunged the share prices of both Royal Dutch and Shell Transport & Trading, reducing the valuations of both companies greatly and the Financial Services Authority levied a £17m ($21.8m) fine against the firm.
The severity of the error led to a reorganisation of the company in 2005, under which both firms would now be incorporated into a single name Royal Dutch Shell, with a single board and chief executive. Currently, the company offers two distinct shares, ‘A’ shares which are listed in Amsterdam and ‘B’ shares listed in London. However, investors have urged further simplification.
Unilever underwent a similar transformation in 2020
Unilever has undergone a similar relocation last year. The consumer goods firm was previously listed as Unilever plc in London and Unilever NV in Amsterdam and had two boards, similar to Shell.
Unilever’s move was prompted by the 15% withholding tax currently levied by the Dutch government on dividends paid by companies headquartered in the Netherlands. Therefore, relocating the firm to the UK increased the attractiveness of shares, boosting company valuations and ensuring easier access to capital. The tax is also thought to have played a part in Shell’s relocation.