By Samuel Indyk

Investing.com – Royal Dutch Shell (LON:RDSa) announced plans on Monday to simplify its share structure to establish a single line of shares, breaking with over a century of tradition in an effort to streamline costs and improve shareholder returns.

The company said it will also move its tax residence to the U.K. from the Netherlands, and likely remove the words 'Royal Dutch' from its name. Board and executive committee meetings will from now on also take place in the U.K. Shell, which has been incorporated in the U.K. with a Dutch tax residence and a dual share structure since 2005, said the measures will make it simpler for investors to understand and value the company, and allow it to compete more effectively.

The measures are consistent with a general pattern amongst oil and gas majors against the backdrop of the pandemic and the long-term shift away from fossil fuels. Shell was forced to slash capital spending, sell assets and even cut its dividend for the first time since World War 2 as oil prices collapsed last year. The need to reallocate investment resources to cleaner technologies over the long run has only reinforced the need to eliminate structural inefficiencies.

The company said the creation of a larger single pool of ordinary shares will make it easier for it to speed up buybacks.

“The simplification will normalize our share structure under the tax and legal jurisdictions of a single country and make us more competitive," said Shell’s Chair, Sir Andrew McKenzie. "As a result, Shell will be better positioned to seize opportunities and play a leading role in the energy transition.”

The Board has unanimously recommended shareholders vote in favor of the proposed resolution at the General Meeting on 10th December 2021. The proposal will require at least 75% of shareholders to vote in favor to pass.

The proposed changes have been welcomed by the UK government.

“Welcome news Shell is proposing to relocate its Group HQ to the United Kingdom as part of their plans to accelerate the transition to clean energy,” UK Business and Energy Minister Kwasi Kwarteng said on Twitter (NYSE:TWTR). “A clear vote of confidence in the British economy as we work to strengthen competitiveness, attract investment and create jobs.”

The news received less support in the Netherlands, where Economic Affairs and Climate Minister Stef Blok said the Dutch government was “unpleasantly surprised” by the proposals.

The move reflects the changing position of the Netherlands in the company's structure. With the planned closure of the Groningen field, the largest in western Europe, the Netherlands is no longer a major production center of hydrocarbons. However, the company pointed to numerous renewable and carbon-offsetting projects in the country and said it will "continue to be a significant employer in the Netherlands."