Demystifying the VC term sheet: Protective Provisions

Protective provisions grant the investors the right to veto or block certain corporate actions. Accordingly, even if the Board of Directors authorizes a particular action, the consent of a certain percentage of the preferred stockholders would be required prior to the company taking such action. The rationale for these provisions is to protect the investors (who are usually the minority stockholder following a Series A financing) from the majority stockholders.

Scott Edward Walker

Full Story: http://venturebeat.com/2011/03/28/demystifying-the-vc-term-sheet-protective-provisions/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+Venturebeat+%28VentureBeat%29