A list of company decisions that require approval from preferred stockholders, regardless of who controls the board.
Protective provisions are a set of reserved rights that give preferred stockholders (investors) veto power over certain company decisions, even when they don't control a majority of the board. They are typically documented in the Voting Agreement and the Certificate of Incorporation, and they persist as long as any preferred stock is outstanding.
Common protective provisions include: issuing new shares or creating a new class of equity, raising additional financing above a certain amount, selling or merging the company, amending the company's charter or bylaws in ways that affect preferred stock, declaring dividends, and taking on significant debt. These provisions exist because investors want protection against decisions that could dilute their ownership or reduce their returns without their consent.
From a founder's perspective, protective provisions mean you cannot take certain actions unilaterally after raising a priced round — even if you own a majority of the company. The list of covered decisions is negotiable, and shorter lists with higher thresholds are more founder-friendly. Reading the protective provisions carefully before closing is one of the most important parts of a priced round review.