8 December 2021 Shell Shareholders Back Relocation to UK

Shell Shareholders Back Relocation to UK​

What do you need to know this week?

Shareholders for Royal Dutch Shell (which you know probably know simply as 'Shell') have given their support for the company’s proposed changes to its tax residence and share structure. These changes include leaving the Netherlands and relocating its main headquarters to the UK next year.

Royal Dutch Shell, which has long since operated a dual share structure both in the Netherlands and the UK, will now be domiciled in the UK and adopt a single class of shares. It will simply be listed as “Shell plc” from next year, dropping “Royal Dutch” from its name.

The company’s management told shareholders that simplifying its structure would better enable the company to meet its energy transformation goals, including net-zero emissions by 2050. Further, they argued that the 15% withholding tax that the Dutch government applies to Dutch shares had constrained its ability to issue share buybacks and acquire other companies.

Over 99% of shareholders gave their approval for these reforms.

However, some commentators have queried if the move was in response to a recent landmark ruling by a Dutch court that Shell needed to accelerate its deadline for energy transformation.

Why is this important for your interviews?

Shells’ decision to relocate to the United Kingdom and reform its corporate structure is a case study in how a large company navigates corporate governance issues, particularly relating to its share structure and tax obligations. Shell has had a long-running dispute with the Dutch government about the 15% dividend withholding tax. Unsatisfied with the government’s failure to address their complaints, shareholders have backed the decision for the company to vote with its feet.

From an economic and political perspective, it is also significant that a so-called “supermajor” — a term given to the six largest oil and gas companies — has chosen to relocate to the UK after Brexit, especially from the Netherlands. This is especially relevant given that Amsterdam has recently sought to claim itself as the capital of the European financial markets in the aftermath of Brexit.

Finally, this is all occurring against the backdrop of the global fight against climate change and large oil companies like Shell occupy much of the public’s spotlight. Regulators and climate change activists will undoubtedly be watching what Shell does in light of its announcements.

As an aspiring commercial solicitor, if you can explain how a company like Shell navigates these complex issues and why, it will demonstrate to your interviewers that you can (a) consider the perspective of its clients and (b) appreciate the broader economic, political, and environmental contexts in which clients operate.

How is this topic relevant to law firms?

When a company like Shell wishes to reform its share structure and relocate its tax domicile, it will need lawyers working across corporate governance, regulatory compliance and tax to advise them. For instance, Shell must ensure that the reforms do not prejudice existing shareholders and that the board of directors took all the necessary steps when proposing the reforms to its shareholders.