The Sunday Times (UK): Shell move robs UK investors: “When the oil giant merged, British investors in the Dutch arm of the firm lost up to 25% of their holdings…”: “Many are elderly investors who have held the shares for decades and face tax bills of tens of thousands of pounds after their stock was converted into shares of the unified company, Royal Dutch Shell. 4”: Sunday 11 Sept 2005
When the oil giant merged, British investors in the Dutch arm of the firm lost up to 25% of their holdings, writes David Budworth
THOUSANDS of UK shareholders in Royal Dutch face an estimated £77m capital-gains-tax bill following its unification with Shell Transport & Trading, and the oil giant is being urged to offer compensation.
Many are elderly investors who have held the shares for decades and face tax bills of tens of thousands of pounds after their stock was converted into shares of the unified company, Royal Dutch Shell.
Netherlands-based Royal Dutch merged with the UK-based Shell Transport & Trading in July.
David Hunter at Smith & Williamson, an adviser, said: “We have several clients who are going to lose a quarter of their stake in tax. Shell’s board knew this was going to happen and have yet to explain why it was necessary to act in this manner rather than offer a straight tax-free share swap.
“Had the board been about to lose a quarter of their salaries it is a racing certainty they would have acted differently."
The sense of injustice has grown as it has emerged that only British investors with Royal Dutch shares face a tax bill. Large numbers of Royal Dutch shareholders in the Netherlands, America, France and Switzerland have been able to transfer their shares tax-free.
Investors who held equity in Shell Transport and Trading also do not face a bill. They qualify for rollover relief and will only be liable for CGT when they dispose of their shares in future.
The deal was put together in the Netherlands by Dutch lawyers under Dutch law. Market rumours suggest that the terms of the merger saved the company £2 billion in stamp duty.
One Royal Dutch shareholder from southwest London, who preferred not to be named, said: “They have shown a total lack of regard for their shareholders. They were able to sort things out for American and Dutch investors, but have ridden roughshod over those in Britain.”
The Association of Private Client Investment Managers (Apcims) believes that the company should offer compensation to the shareholders who have accepted the merger and now face a tax bill.
Kevin Sloane at Apcims said: “The treatment of British investors in Royal Dutch has been manifestly unfair. We feel very strongly the company has a moral obligation to these shareholders, some of whom have been loyal investors for 30 years or more.”
Several hundred rebels have refused to accept the terms of the merger. Apcims has asked Shell to come up with a new tax-neutral share offer for these investors, but so far it has refused to budge.
Shell said: “When we put the offer together, we explored many different options to make this deal the best we could for the interests of our shareholders and the companies. We are carefully reviewing the options available to obtain 100% of the Royal Dutch shares. Any proposal for acquiring the remaining shares will be made no later than the end of this month.”
The creation of Royal Dutch Shell has also caused a headache for investors with index-tracker funds. Following the merger, Shell makes up 5.5% of the Footsie instead of just over 3%.
Some advisers are worried that this makes the index too concentrated and dependent on a few companies, which could blunt returns from tracker funds. Ten years ago, the top 10 stocks represented only 23% of the FTSE All-Share, but now they make up more than 42%.
Trackers have been forced to increase their exposure to Shell, as they mirror an index exactly. But Jason Butler of Bloomsbury Financial Planning, another adviser, believes the concerns are overblown. “A FTSE All-Share tracker is fine in a diversified portfolio,” he said.
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