Shell’s UK relocation plans cause outcry in the Netherlands

News of oil company Royal Dutch Shell’s plan to relocate its operations to the UK has caused uproar in its native Holland. It has also laid clear some of the risks that may emerge in a post-Brexit Europe where different tax treatments and regulatory frameworks may lead to some companies redomiciling.

Another aggravating factor could well be the UK’s divorce from the European Union and the possibility that the UK diverges from EU standards and regulations. This not only includes changes to corporation tax rates but rules over sustainability and emission targets amid the transition to net zero.

Royal Dutch Shell announced that it would scrap its current dual-listings structure and move its tax residence from Holland to the UK. It is also expected to drop the ‘Royal Dutch’ from its title and will be simply known as ‘Shell’.

“The current complex shares structure is subject to constraints and may not be sustainable in the long term,” stated the company. It added that the move would strengthen the company’s “competitiveness and accelerate both shareholder distributions and the delivery of its strategy to become a net-zero emissions business”.

The plan has not gone down well in Holland, with either the government or the public. On Twitter, the Dutch economic affairs minister Stef Blok said: “We are unpleasantly surprised by this. The cabinet deeply regrets this intention. We are in talks with Shell about the implications of this move for jobs, critical investment decisions and sustainability. Those are hugely important,” he added.

In contrast, the UK’s business secretary Kwasi Kwarteng hailed the move as “a clear vote of confidence in the British economy” post-Brexit.

The proposal still has to be passed by shareholders at Royal Dutch Shell and will require at least 75% of the vote at a special meeting to be held on 10 December. The company’s shares rose by 2.1% following the announcement.

The possible redomiciling comes just six months after Royal Dutch Shell was ordered by a Dutch court to increase its greenhouse gas emissions cuts, a decision that Shell plans to appeal.

At the time, the court’s landmark decision was described as “epoch-making” by Clyde & Co lawyer Nigel Brook and one that would have “huge implications” for corporates and their sustainability plans.

Shell has also come under pressure from investors over its sustainability plans. Dutch pension fund ABP has announced that it will divest its €15bn stake in fossil fuel companies, including Shell, by 2023, while another investor, Third Point, has pushed for Shell to be broken up.

The company has also been in a dispute with the Dutch government over a 15% dividend withholding tax, which it would no longer have to pay if it moved its headquarters to the UK.

Dutch Prime Minister Mark Rutte had planned to scrap the tax in 2018 to avoid companies relocating but this was abandoned and the tax remains.

Shell’s chairman Andrew Mackenzie has blamed this for the company’s move. During an investors’ conference call, he said: “The reality of looking for the simplification was that the imposition of a withholding tax on dividends here in the Netherlands meant that we were driven to go to the UK.”

Another Anglo-Dutch firm Unilever relocated from Holland to the UK in 2020 and is now a single London-listed entity.

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