Protective Provisions

Decisions the company may not take without the consent of the preferred holders: issuing senior stock, selling the company, changing the charter, taking on debt above a limit, changing the board size. They are the practical form of investor control in a minority position, and the list grows with each round unless someone negotiates it down.

Where Protective Provisions comes up

Liquidation Preferences and Preferred Stock, ExplainedOwnership is a fraction. A preference is a choice. Every instrument a venture investor holds is a different rule for making it, and the exit value decides which way it goes.Read the guide — 13 min

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Related Venture Capital terms

Term Sheet Pro Rata Ownership Target Vesting and Cliff Power Law (Venture Returns)Right of First Refusal (ROFR)Fund Returner

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