Daily Telegraph: Shell bows to UK investor pressure: "Shell yesterday performed an embarrassing U-turn and offered new tax-free merger terms to British investors in Royal Dutch Petroleum:": "However, Shell is risking the wrath of British shareholders in Royal Dutch who accepted the terms of the deal and have been left with a multi-million pound tax bill. Shell said that it believed it was not "appropriate" to compensate them.": "I think they realised that they had made a big mistake. I don't think they thought people would protest.": Wednesday 21 Sept 2005

By Christopher Hope, Business Correspondent (Filed: 21/09/2005)

Shell yesterday performed an embarrassing U-turn and offered new tax-free merger terms to British investors in Royal Dutch Petroleum who were refusing to agree to the unification with Shell Transport & Trading.

However, Shell is risking the wrath of British shareholders in Royal Dutch who accepted the terms of the deal and have been left with a multi-million pound tax bill. Shell said that it believed it was not "appropriate" to compensate them.

	Click to enlarge

The Association of Private Client Investment Managers and Stockbrokers, which has been campaigning on the issue, said: "This is a clear message to large corporations that they have to look after the interests of all of their shareholders, not just some."

Shell's plans to create a £130billion giant called Royal Dutch Shell earlier this year were heavily criticised for leaving 3,000 UK holders in Royal Dutch with a £77m capital gains tax bill on their combined £192m holding.

In the months leading up to the merger, Shell's chief executive, Jeroen van der Veer, insisted that there was nothing in the company's "tool-box" to help the British shareholders because it had been structured as fair to all on a pre-tax basis.

However, after 1.3pc of investors in Royal Dutch failed to accept the deal, Shell decided to consider its options. Its directors, who met on Monday, agreed to offer tax-efficient loan notes which can be swapped for shares in the new company.

Shell said: "UK resident Royal Dutch shareholders will be offered the opportunity to elect to receive loan notes that are exchangeable... These loan notes will provide the ability to achieve a roll-over for UK capital gains purposes."

Shell defended the U-turn, saying the loan note was not available to investors before the offer period closed last month because the boards of Royal Dutch and Shell Transport had insisted the offer should be the same for both sets of shareholders.

Shell sources insisted they only realised in the past fortnight the loan note could be offered as part of a tidying up of various intra-company share holdings.

Shell decided it would not be "appropriate" to offer help to investors who had accepted and were left with a tax bill.

The spokesman said: "Royal Dutch Shell does not believe that it is appropriate to make payments to some shareholders for their individual tax liabilities which are computed with reference to their individual circumstances.

"In addition, UK shareholders who accepted the Royal Dutch offer will have the tax base cost of their investment reset, which may reduce or eliminate the capital gains tax arising on future disposals. On this basis, it would be inequitable for Royal Dutch Shell to make payments to these shareholders for their tax liabilities."

Julian Mathias, one of the rebels whose 92-year-old mother would have been left with a £21,000 tax bill on her £76,000 taxable gain as a result of the shake-up, said: "I am not enthusiastic about it but it is better than nothing. It is the least bad option."

Angela Knight, Apcims' chief executive, said she believed Shell was stung into action when it realised the strength of the protests from high profile rebel investors such as Peter Buckley, chairman of Caledonia Investments, and City broker Smith & Williamson: "I think they realised that they had made a big mistake. I don't think they thought people would protest." Ms Knight feared there was little that could be done for Royal Dutch holders who accepted the merger terms "under duress".

She said: "We can't see how there is any way back. They will be stuck with the tax bill. They should write to their MPs to get the issue raised."

Charlotte Black, marketing director of Brewin Dolphin, said it was "great news that commonsense had prevailed". She added: "It is only unfortunate it took such pressure for the company to see its error. Many UK shareholders who accepted the terms have been left nursing a totally unnecessary CGT liability."