Why Shell wants to drop the Royal Dutch

Logos of Shell is pictured at a gas station in the western Canakkale province, Turkey April 25, 2016. REUTERS/Murad Sezer
Logos of Shell is pictured at a gas station in the western Canakkale province, Turkey April 25, 2016. REUTERS/Murad Sezer
Image: Reuters/Murad Sezer
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Royal Dutch Shell, which is headquartered in the Dutch capital, The Hague, is looking to shift its base to the UK.

The oil and gas conglomerate wants to ditch its dual-share structure and “establish a single line of shares” to “increase the speed and flexibility of capital and portfolio actions,” it announced in a circular today (Nov. 15). Additionally, the Anglo-Dutch firm, which has been incorporated in the UK and had a Dutch tax residence since 2005, wants to move its tax residency to the UK. Some of Shell’s top brass, including chief executive Ben van Beurden and and chief financial officer Jessica Uhl, plan to relocate there, too.

This restructured organization will not only be “simpler for investors to understand and value,” but it will also help Shell realize its goal of becoming a net zero emissions energy business by 2050 with more agility, the circular states. Shell’s shares rose 2% on the news.

When will Royal Dutch Shell become Shell?

At the upcoming Dec. 10 general meeting, at least three-quarters of the company’s shareholders will have to vote in favor for the changes to be implemented. If Shell restructures, it will also strike down “Royal Dutch”—a part of its moniker since 1907— and officially become Shell.

“Carrying the Royal designation has been a source of immense pride and honor for Shell for more than 130 years,” the company said. “However, the company anticipates it will no longer meet the conditions for using the designation following the proposed change.” That is unless the UK’s Queen Elizabeth gives it royal approval across the channel, which is unlikely.

The lead up to Shell restructuring

The proposed move comes less than a month after US-based activist investor Third Point, which has a $750 million stake in Shell, called on Shell to split into two businesses—one for “legacy” assets oil and gas and another for renewable energy—much like General Electric, Toshiba and Johnson & Johnson have done recently.

Shell had hit back saying it was “better together.” But it recognizes it has housekeeping to do, prompting its streamlining efforts. “The simplification will normalize our share structure under the tax and legal jurisdictions of a single country and make us more competitive,” Shell chair Sir Andrew Mackenzie said.

For shareholders, legal, ownership, voting, and capital distribution rights will remain unchanged. The company’s shares will also continue to be listed in Amsterdam, London, and New York.

Shell is moving away from the Netherlands…

The Dutch name isn’t all that Shell is shedding. It’s also distancing itself from a strained relationship with Dutch authorities and activists.

The company has long been against the country collecting 15% dividend tax for Dutch-domiciled companies, and it’s not the only one. Last year, consumer products giant Unilever also ditched dual listing and abandoned Rotterdam for London. The UK doesn’t have such a tax.

Moreover, the climate pressure has been mounting. Last month, the Netherland’s biggest state pension fund ABP stopped investing in fossil fuel companies, including Shell, after failing to persuade the sector to rapidly move towards decarbonization. In May, environmental groups and more than 17,000 Dutch citizens won a landmark lawsuit in which the court ordered Shell to cut carbon emissions from its oil and gas business by 45% by 2030, compared to 2019 levels. In July, Shell confirmed plans to appeal the ruling.

However, moving away won’t allow Shell to avoid scrutiny. “This news has no negative consequences for Milieudefensie’s climate case against Shell,” said Peer De Rijk, campaigner at one of the activist groups Milieudefensie, the Dutch branch of Friends of the Earth. “In any case, this lawsuit will remain with the Dutch courts.”

…but its Dutch business remains extensive

While UK energy secretary Kwasi Kwarteng hailed the proposed move as a “vote of confidence in the British economy,” Dutch economic affairs and climate minister Stef Blok said he was “unpleasantly surprised,” and raised concerns around the company’s sustainability strategy in the Netherlands. After all, Shell’s energy commitments in the nation are huge and long-term.

For instance, in March, the company became the full owner of the Netherlands’ first offshore wind farm. In July, it announced plans to build a 200-megawatt hydrogen electrolyser. In September, Shell committed to building a 820,000-tonnes-a-year biofuels facility at its Rotterdam facility.

It’s also a part of the ambitious Porthos project, which will capture carbon emissions from factories and refineries in Rotterdam, then transport and store them in empty gas fields beneath the North Sea.

It can’t just walk away—nor does it want to. Three major arms— the projects and technology division, the global upstream and integrated gas businesses, and the renewable energies hub—will continue to be located in The Hague. Shell insists it “will continue to be a significant employer with a major presence in the Netherlands.”