protective provisions

Definition

Veto rights that let preferred shareholders block certain major decisions like selling the company or raising more money. Democracy in theory, oligarchy in practice.

Example Usage

We wanted to sell for $50M but our Series B investors used their protective provisions to block it, holding out for more.

Origin

Corporate law and preferred stock structures

Fun Fact

Protective provisions can create deadlock situations where founders can't move forward without investor approval—turning your company into a hostage situation.

Source: Corporate law and venture capital governance terms

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