As It Moves HQ To London, Royal Dutch Shell to be Called Simply “Shell”
“Where is Shell based?” The answer to that is likely to get simpler very soon.
Shell has decided it no longer needs to be either Royal or Dutch.
The oil giant which has been incorporated in the UK will move its tax residence from the Netherlands to the UK as well, Shell said.
If shareholders approve, it will shorten its name to “Shell” and its CEO Ben van Beurden and other top executives will move to a corporate headquarters in the UK.
The biggest practical implication of the change in the tax residence is that it will no longer need to maintain two classes of stock—A-shares held by Dutch nationals to comply with that country’s tax law which requires dividend withholding, and B-shares for everyone else.
Shell said having a single class of stock will simplify stock buybacks and acquisitions at a time when it needs to quickly transition from being an oil company to one focused on low-carbon energy sources. It said this is the next logical step after it announced a new organizational structure to manage this transition in August.
For engineers and others working in Shell’s technical centers in the Netherlands, this will not change things. The company said, its “Projects and Technology division, global upstream and integrated gas businesses, and renewable energies hub remain located in The Hague.”
It will continue working on new energy projects such as a low-carbon biofuels plant and Europe’s biggest electrolyzer for mass production of hydrogen, both located in Rotterdam.
While Shell has been feeling pressure in the Netherlands to go well beyond the emissions reductions target, Shell said it is not related to this change.
A district court in The Hague has ordered Shell to reduce emissions from its business and from those using its oil and gas products by 45% by 2030 The company has raised its target to 50% by then. But its target is limited to its operations, which is a far more manageable challenge.
“The court ruled that the decision is immediately enforceable against Shell and should not be suspended pending an appeal. This applies regardless of our tax residence location,” Shell said in a statement.
The exit also raises the possibility that the Dutch government will impose an exit charge related to investor dividend withholding. While a bill has been proposed in the Dutch Parliament to impose that charge, it has not been passed. Shell said its legal advisors indicated it is not likely to have to pay an exit tax.
Dutch and British History
Royal Dutch was founded in 1890. The name reflects the royal charter granted to the then small company to develop an oil field in Northern Sumatra, which was then part of the Dutch East Indies and is now Indonesia.
Shell’s Anglo-Dutch structure dates to 1907 when Royal Dutch Petroleum Co. combined with UK-based Shell Transport and Trading Company. The dual ownership structure maintained corporate roots in those countries, according to the company history.
The British competitor, Shell Transport, was founded in Britain 7 years later and chose the Shell name because the father of the brothers who founded it had owned a company whose imports included shells.
The A/B share system dates back to 2005 when Royal Dutch and Shell Transport were unified under a common parent company. Shell said at the time the dual-share system was not expected to be permanent.
The final decision is scheduled for 10 December at a meeting at the Rotterdam Ahoy, a convention center located not far from its current corporate headquarters in The Hague.