A shareholders’ agreement protects your mission so that shareholders can’t change it.
Protecting your mission is called mission lock. You want to protect your mission before you allow anyone else to invest in your business, because your mission:
- is an important reason your shareholders invest in your business
- is your public commitment to what you do
keeps you on track.
These are some ways you can use your shareholders’ agreement to lock in your mission.
Put your mission statement first
Your mission statement is a sentence or two that summarises your mission.
For example: Our mission is to provide meaningful work for people with learning disabilities. We’ll provide the training and support necessary to help our staff build skills, self-esteem and confidence.
Commit to your mission statement
Add a short section or clause that says everything about your business must help achieve your mission statement.
For example: We will only engage in business or activity that supports our mission.
Make sure plans help achieve your mission
Confirm that strategic plans, business plans, or both, must help achieve your mission. You can specify that a certain percentage of shareholders must approve them.
Ask for reports
Explain how your business will tell shareholders if it’s meeting its mission. You can specify how often to report and what measures to include. You can even specify that these reporting measures are part of the leadership team’s key performance indicators or goals.
Protect your assets
Include details about what happens to business assets.
For example, you can say the business must keep a certain proportion of profits in the business to meet the mission instead of paying them to shareholders. You can also specify what happens to the assets.
Specify who can invest
Specify what existing shareholders must think about before they agree to take on a new shareholder.
For example, you can say they must consider if the new person supports the mission. If the person doesn’t, you could allow your existing shareholders to stop them from becoming a shareholder.
Decide if someone must sell
Add a section that says shareholders can force another shareholder to sell their shares, if they’re doing something that harms your mission. You can specify what percentage of shareholders would have to agree before a forced sale happens.
Protect your protection clauses
Include a section to protect all the other sections that protect your mission. This clause can say that shareholders must carefully consider any changes to the shareholders’ agreement.
Businesses usually need more shareholders to agree to these types of changes, compared to general decisions.
The best way to protect your mission is to find investors who agree with it. Think carefully about what kind of investors you want.
