ShellNews.net: TAXING QUESTIONS ARISING FROM ROYAL DUTCH SHELL MERGER: POSTED 17 AUGUST 2005: 11.45 ET
TAXING QUESTIONS ARISING FROM ROYAL DUTCH SHELL MERGER: Open Letter to Royal Dutch Shell shareholders from Association of Private Client Investment Managers and Stockbrokers
Association of Private Client
Investment Managers and Stockbrokers
114 Middlesex Street
London El 7JH
Tel. +44 (0) 20 7247 7080
Fax: +44 (0) 20 7377 0939
5th July 2005
Letter to Royal Dutch Shell Shareholders
Shell Reconstruction and Royal Dutch Shell Shareholders
You contacted us at APCIMS in regard to your concern about the Shell reconstruction and the Capital Gains Tax consequences. As a result, I am writing to you with an update which I hope you will find helpful.
As you appreciate we are not in a position to advise you on the action you should be taking in relation to the Royal Dutch offer and if you need assistance you must seek the advice of your financial adviser.
The Royal Dutch Annual General Meeting and Shell Transport Annual General Meeting took place on 28th June, but the actual Royal Dutch offer does not close until 18th July 2005. As you know, Shell are required to get 95% acceptance for the offer to proceed and considering the extent of the institutional holdings, it is reasonable to assume that they may reach the 95% threshold, but will not achieve 100% acceptance. This leads to the two questions which are frequently raised with us, of which the first is, whether individuals should accept this offer if they are facing the likelihood of a Capital Gains Tax bill as a result and, secondly, what happens to those shareholders who do not accept.
As you know we have taken this matter to very high levels within Shell in order to try and bring about a better proposition for the UK private investors in Royal Dutch. Although Shell have given us a fair hearing, they have not agreed to make any changes and they inform us that Dutch law, which governs this offer, prevents them making any comments whatsoever whilst the offer remains open. I am very sorry that this is the case as it gives little assistance to you, but nevertheless we will continue to keep the pressure on the company. We remain of the view that it is unacceptable that Shell should have put some of their shareholders into such a difficult situation.
Once offer closure date is reached, Shell will announce the percentage votes and may well keep the offer open for a further few days, which is a normal practice. They will then have to consider what to do with the shareholders who have not accepted the offer and I can assure you that we will be discussing this issue with them. One possibility is that they initiate what are known as "squeeze out provisions" which are governed by Dutch law, have to be approved by a Court and have to be fair. I have been told that in Dutch law, when a squeeze out is used, the company usually make, a cash offer for the shares. However, I have not been able to confirm this absolutely. Another option would be for Shell not to initiate squeeze out and the shareholders therefore will remain holding their Royal Dutch shares and the dividends being paid as before. However, these shares will not be tradable in the way that they are at the moment if this took place and they will not be quoted on an exchange such as the London Stock Exchange.
A third option, and the one which APCIMS has been urging Shell to adopt, is to make a secondary offer to these residual shareholders which is constructed as a straightforward share exchange and which in UK law would be accepted as qualifying for rollover relief and which, from Shell's perspective, is economically the same as the current offer. The reason why we have been urging this option is that it resolves the Capital Gains Tax problem for the UK shareholders in Royal Dutch Shell. Sadly though we have absolutely no indication whatsoever as to which of these options — or indeed any other option — Shell might choose once the July dates have been passed.
I have been making some enquiries as to the views of a number of brokers in respect of this matter. Whilst clearly it will have to be for each and every shareholder to decide whether or not they take the current offer, the general picture that is developing appears to be one whereby those shareholders who may either only have a small Capital Gains Tax bill or may have some capital losses to offset the gain, may well find it appropriate to accept the offer. Meanwhile, for those for whom the Capital Gains Tax consequences are significant, then waiting to see what happens appears to be the option that, we understand, an increasing number are taking.
I hope that this letter is helpful and I am so sorry that we have not been able to get Shell to be more helpful, but we will keep on trying.
With best wishes
Association of Private Client Investment Managers and Stockbrokers
Company limited by guarantee
Registered in England and Wales No. 2991400
VAT Registration No. 675 1363 26
Fair Use Notice: This site contains copyrighted material the use of which has not always been specifically authorized by the copyright owner. We are making such material available in our efforts to advance understanding of environmental, political, human rights, economic, democracy, scientific, and social justice issues, etc. We believe this constitutes a 'fair use' of any such copyrighted material as provided for in section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. For more information go to: http://www.law.cornell.edu/uscode/17/107.shtml.If you wish to use copyrighted material from this site for purposes of your own that go beyond 'fair use', you must obtain permission from the copyright owner. Site Ownership: Shell 2004.com (also known as ShellNews.net) IS OWNED AND OPERATED BY THE SHELL SHAREHOLDERS ORGANISATION: CHAIRMAN ALFRED E DONOVAN, 847a Second Avenue, New York City, NY 10017, USA. The statements expressed here, and any opinions, are those of the writers alone, and neither are opinions of nor reflect the views of Shell2004.com. Content created by the writers is the sole responsibility of the writers and its accuracy and completeness are not endorsed or guaranteed. This goes for all links, too: Shell2004.com has no control over the information you access via such links, does not endorse that information, cannot guarantee the accuracy of the information provided or any analysis based thereon, and shall not be responsible for it or for the consequences of your use of that information.
© 2004/5 Shell2004.com All rights reserved.
Click here to return to ShellNews.net HOME PAGE