Mohammed is delighted he can help so many people and would like to expand his Auckland business into Wellington. But to do that, he requires money to hire more staff and rent an office.
He’s asking his long-time friends Pita and Chloe if they want to be shareholders in his business. He knows they will invest because they support his mission. So he’s confident this meets the first rule of protecting your mission: find investors who support your mission.
Still, his accountant suggests he includes a few protections in the shareholders’ agreement, because that’s best practice. He goes through his accountant’s suggestions.
Put your mission statement first
Mohammed refers to his mission statement, "We will improve people’s wellbeing, health and dignity by helping them find jobs."
Commit to your mission statement
He writes, "All operational and ownership arrangements must help us achieve our mission statement. We will not take part in activities outside the scope of our mission statement."
Make sure plans help achieve your mission
He writes, "Shareholders who together have a total amount of shares over 50%, must approve strategic and business plans."
Ask for reports
He intends to keep Pita and Chloe fully informed anyway, so this is easy. He writes, "The business must provide quarterly reports to shareholders. As a minimum, reports must:
- report the number of workshops the business runs
- report the number of workshop participants
- show the percentage of participants employed after three months."
Protect assets
Because the only assets are their computers, Mohammed does not think this applies.
Mohammed looks over the other suggestions: specify who can invest, decide if someone must sell, and protect your protection clauses.
He does not think he needs to worry about these points because he will keep 60% of the company. Also, he knows Pita and Chloe very well. But to be safe, he will ask his accountant if he can ignore those points.