Finance

This is why Shell wants to leave the Netherlands

1. Why is Shell doing this?

A simplification of the company structure, the company itself cites as the reason. The most important change is that the Royal Dutch Shell A share disappears, only RDS B remains.

That makes it easier for investors and the company itself. Because suppose that Shell wants to issue additional shares to make a takeover, then it still has to request permission from two groups of shareholders. One company with one type of share is much simpler.

Share buybacks, which companies do to please their shareholders, also become much easier with a share class. Now it’s complicated: when one share is repurchased, dividend tax is due, while another is not. Shell has wanted to get rid of that for years.

This is now even more important to make the switch to a sustainable energy company, says Marjan van Loon, director of Shell Netherlands.

2. Sounds logical, but why choose London?

Shell goes for the United Kingdom. The company is already British in corporate form, but the head office is officially still in The Hague and Shell has the Netherlands as its seat for tax matters.

That will change if this plan goes ahead, because Shell will fall under the British tax system. Jan van de Streek understands that choice. He is professor of corporate taxation at the University of Amsterdam. According to him, the company has lost a number of tax benefits that it enjoyed in the Netherlands in recent years.

This concerns, among other things, the abolition of the possibility to deduct losses of a foreign subsidiary from the profits in the Netherlands. In addition, the abolition of the dividend tax, something that Shell and Unilever had been lobbying for years, did not go through.

Brexit has also played a part, says Rem Korteweg of the Clingendael Institute. “Like Unilever, Shell has always had one leg in the Netherlands and the other in London. The split above the North Sea will only increase due to Brexit.”

Keeping track of the differences between rules in the EU and the UK costs multinationals a lot of money, he explains. According to him, Shell opts for the UK because the company has better access to investors through the City of London than through the Amsterdam Zuidas.

But to see the departure of Shell and previously Unilever as a gain for the Brexit camp, Korteweg is going too far. There are also plenty of companies that have moved their headquarters from the UK to Europe. “They make pragmatic choices based on the split.”

3. Does this still mean anything for Shell’s sustainable ambitions?

Mark van Baal is very positive about that. With Follow This as an activist shareholder, he has been trying for years to force Shell to become more sustainable more quickly. He is hopeful that he can now exercise this role at British shareholders’ meetings.

Shareholders have more power in the Anglo-Saxon business model than in the Rhineland polder model such as ours. Here, the top of a company can more easily ignore the wishes of shareholders by hiding behind other stakeholders such as employees.

In the US and the UK, Shell is less likely to get away with this. And that also applies to the decisions about greening that are taken at a shareholders’ meeting, according to Van Baal.

4. What does this mean for jobs in the Netherlands?

According to Shell, very little. Except for CEO Ben van Beurden, financial director Jessica Uhl and some top managers, no other jobs are disappearing in the Netherlands. Yet the cabinet is ‘unpleasantly surprised’, says a disgruntled minister Stef Blok on Twitter.

The outgoing cabinet is so disappointed with the relocation plan that Blok and State Secretary Hans Vijlbrief are asking in the House of Representatives whether there is support for abolishing the dividend tax after all.

5. What do you notice about the pump?

Probably nothing at all, because the company will remain active in the Netherlands. And the oil the company pumps remains suitable for fuel for left-hand drive cars.

6. Will the ‘Royal’ predicate disappear?

Yes, that is coming to an end after more than 130 years. Shell assumes that it will lose its claim to the ‘Royal’ designation and will therefore continue as Shell plc. This stands for public limited company and is the British version of the Dutch public limited company.

7. When is all this going to happen?

Shell expects to implement the plan early next year. First, the shareholders have to give their blessing, at the general shareholders’ meeting on December 10 in Ahoy Rotterdam.

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