The Board of Royal Dutch Shell plc (Shell) on Monday said it is simplifying the company’s share structure to increase the speed and flexibility of capital and portfolio actions, a move that will see it move its headquarters to London to align its tax residence with its country of incorporation.
“The simplification is designed to strengthen Shell’s competitiveness and accelerate both shareholder distributions and the delivery of its strategy to become a net-zero emissions business,” the company said in a release.
Andrew Mackenzie, Shell’s Chair, said: “At a time of unprecedented change for the industry, it’s even more important that we have an increased ability to accelerate the transition to a lower-carbon global energy system. A simpler structure will enable Shell to speed up the delivery of its Powering Progress strategy, while creating value for our shareholders, customers and wider society.”
Under the proposal, Shell intends to change its share structure to establish a single line of shares, which is simpler for investors to understand and value.
Shell has been incorporated in the UK with Dutch tax residence and a dual share structure since the 2005 unification of Koninklijke Nederlandsche Petroleum Maatschappij and The Shell Transport and Trading Company under a single parent company. It was not envisaged at the time of unification that the current A/B share structure would be permanent.
The company said a single share structure will allow it compete more effectively.
Read also: Conoil assures shareholders competitive returns on investment
It will also allow it to accelerate in distributions by way of share buybacks, as there will be a larger single pool of ordinary shares that can be bought back.
Following the start of a $2 billion buyback programme in July, Shell announced in September that it will return an additional $7 billion to shareholders following completion of the sale of its Permian assets in the United States.
According to the company, the single share structure will strengthen Shell’s ability to rise to the challenges posed by the energy transition, by managing its portfolio with greater agility.
It will also enable it to reduce risk for shareholders by simplifying and normalising Shell’s share structure in line with its competitors and most other global companies.
“The current complex share structure is subject to constraints and may not be sustainable in the long term,” it said in the release.
Following the simplification, shareholders will continue to hold the same legal, ownership, voting and capital distribution rights in Shell. Shares will continue to be listed in Amsterdam, London and New York (through the American Depository Shares programme), with FTSE UK index inclusion. It is fully expected AEX index inclusion will be maintained. Shell’s corporate governance structure will remain unchanged, the company said.
Mackenzie said the “simplification will normalise our share structure under the tax and legal jurisdictions of a single country and make us more competitive. As a result, Shell will be better positioned to seize opportunities and play a leading role in the energy transition. Shell’s Board unanimously recommends shareholders vote in favour of the proposed resolution.”
This move will mean that the company’s name will change.
“Therefore, subject to shareholder approval of the resolution, the Board expects to change the company’s name from Royal Dutch Shell plc to Shell plc,” the company said.
Shell said it was proud of its Anglo-Dutch heritage and will continue to be a significant employer with a major presence in the Netherlands. Its Projects and Technology division, global Upstream and Integrated Gas businesses and renewable energies hub remain located in The Hague.
Shell’s growing presence in wind projects off the Dutch coast, recent decision to build a world-scale low-carbon biofuels plant at the Energy and Chemicals Park Rotterdam, plan to build Europe’s biggest electrolyser in Rotterdam, and its intention to participate in the Porthos carbon capture and storage project, all underline the importance of the Netherlands to the company’s energy transition activities, the company said.
