Shell to shake up share structure
Shell expects to drop the words "Royal Dutch" from its name to become "Shell Plc" as it seeks to ditch its dual share structure and move its tax residence to the UK from the Netherlands.
The firm expects the simplification of its share structure — which is subject to shareholder approval — to "accelerate both shareholder distributions and the delivery of its strategy to become a net-zero emissions business".
Shell is currently incorporated in the UK but has a Dutch tax residence and two classes of shares. Shell established this structure in 2005 with the merger of Royal Dutch and Shell Transport, which took place in an attempt to close the chapter on multiple oil and gas reserves recategorisations a year earlier.
"A" shares are currently subject to a Dutch dividend withholding tax payable by Shell, while B shares are not — if paid from a UK source. This reduces the number of shares Shell can buy back economically within a given period, and the pace at which cash can be returned to shareholders through buybacks, Shell said. Up until now, Shell has been largely buying back lower cost "B" shares.
The proposed restructuring will create a larger single pool of ordinary shares that can be bought back faster, Shell said.
The move would mean Shell no longer qualifies for the Royal Dutch designation.
Shell said it did not envisage at the time of the unification in 2005 that the dual share structure would be permanent. But the proposal to simplify its share structure comes at a time of increasingly tense relations with the Netherlands.
A Dutch court in May ordered Shell to accelerate its net zero strategy by cutting its worldwide net carbon emissions by 45pc by the end of 2030 compared with 2019 levels. Last month, Shell set a target to halve absolute emissions from its operations, known as Scope 1 and 2, compared with 2016 levels. The court ruling — which Shell has appealed — also expects Shell to make a "significant best-efforts obligation" to cut emissions from Shell's customers, known as Scope 3.
The simplification will have "no impact on legal proceedings" as the court decision was immediately enforceable and "should not be suspended pending an appeal," Shell said. But US bank Jefferies said a clearer separation from the Netherlands could "make it harder to claim that the Dutch Court has jurisdiction".
Shell's share price rose by 1.8pc at time of writing.
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