Protective provisions

Definition

A list of decisions the company cannot make without investor consent.

Why It Matters

This is how a minority holder keeps a veto without holding a majority, and in a search fund deal it is usually the real governance rather than the board seats are. The standard list covers selling the company, taking on debt above a threshold, issuing new equity, and changing what the business does. Read the debt line hardest of the four: a threshold set low enough puts a routine equipment purchase in front of the cap table, which is a delay measured in weeks at exactly the moment a machine has broken.

In numbers: A $250,000 debt consent threshold turns a $300,000 truck replacement into a shareholder vote.