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On 15 November 2021, Royal Dutch Shell plc its proposals to simplify the structure of the company in order to strengthen its competitiveness. As part of the simplification, the company proposes to abandon its complicated dual class share structure (DCSS) and relocate its headquarters, along with its CEO and CFO, to the UK. Which means that after 130 years, Shell will no longer be Royal or Dutch. The move will align the company’s tax residence with its country of incorporation and its board and executive committee meetings will also be relocated from the Netherlands to the UK. As a result, the company will no longer meet the conditions for using the honorary Royal designation and instead become known as Shell plc. The restructure, recommended by the board, will be put to a shareholder vote at the General Meeting scheduled for 10 December 2021.

The overhaul was set in motion over a decade ago when the company completed the unification of Royal Dutch Petroleum Company and Shell Transport & Trading Company in 2005. The unification sought to simplify the previous dual-parent structure and improve corporate governance by implementing a non-executive Chair, CEO and a single board of non-executive and executive directors. The 2005 reorganisation meant that the UK incorporated company still had its headquarters and tax residence in the Netherlands and created a dual class of A and B shares listed in Amsterdam and London.

Since then, investors have continued to press for further simplification as the unusual structure is complex for shareholders and imposes several constraints. One major constraint that irked investors is that the Netherlands has a dividend withholding tax (DWT) which the UK does not. Therefore, moving its tax base to the UK would remove the undesired cap on Shell’s shareholder distributions. The Anglo-Dutch oil giant has made it clear that the current proposals are a way to remove such constraints, increase its competitiveness and accelerate delivery of its strategy to become a net-zero emissions energy company. In a circular letter from the board on 15 November 2021, Chair of the board, Sir Andrew Mackenzie, wrote: 

‘Our competitors have a more flexible share structure than we do. A conventional single share structure will enable Shell to compete more effectively…[and] allow for an acceleration in distributions by way of share buybacks, as there will be a larger single pool of ordinary shares that can be bought back.’

Currently, buybacks of A shares are subject to the Dutch DWT, payable by the company, while B shares are not. This reduces the number of shares Shell can buy back within a given period. However under a single share structure, Shell can access a larger pool of shares increasing the pace at which cash can efficiently be returned to shareholders through buybacks. Following the announcement, Shell’s share price rose more than 2% which is evidence that investors are responding positively to the news.

Nevertheless, Shell’s decision to relocate has been met with political backlash from the Netherlands, as Dutch politicians threaten to impose an ‘exit tax’ to deter Shell from making the move and presumably other companies from following suit. It has been said that the Netherlands has not made Shell feel welcome for a while, following a ruling in the Hague District Court earlier in 2021 which ordered the oil company to reduce its carbon emissions by 45% by 2030, a much more rapid pace than Shell had originally planned. The decision applies only in the Netherlands, so the move to the UK will essentially let Shell off the hook and allow the company to deliver its ‘Powering Progress’ strategy, which aims to accelerate the transition of its business to net-zero emissions, at its own pace. In the letter from the board, Sir Andrew Mackenzie stated: 

‘The Simplification will provide the Company with greater flexibility to deliver on these priorities and accelerate the delivery of our Powering Progress strategy.’

Shell’s proposal to move its headquarters is a royal result for London, providing a clear vote of confidence in the UK economy as it strives to attract investment and improve its competitiveness. It suggests that London is starting to gain a competitive advantage over traditionally ‘business friendly’ jurisdictions such as the Netherlands following proposals by the UK government and the Financial Conduct Authority to address the competitiveness of the UK. Shell’s move comes shortly after the move of fellow Anglo-Dutch companies RELX, which abandoned its DCSS in 2017 in favour of a single London listing, and Unilever, which also dropped its DCSS and relocated its headquarters to the UK in 2020.