What are protective provisions in a term sheet?

Protective provisions are veto rights held by preferred shareholders over specific company actions — selling the company, issuing senior stock, taking on major debt, changing the charter — regardless of board composition. They protect a minority investor from being outvoted on decisions that could impair their position.

A standard set of protective provisions is unremarkable; the negotiation is about scope. Vetoes over ordinary-course decisions (budgets, hiring) overreach, and thresholds are often set so that a single small investor cannot block a financing.