Protective provisions
The actions the company cannot take without the preferred's consent, from the NVCA model charter.
Protective provisions are a veto. While a set number of preferred shares is outstanding, the NVCA model charter says the company may not do certain things without the preferred's consent, whatever the board decides.
Where this lesson's rules come from
The sources behind this lesson's requirements, by kind. Background reading explains; it is never the authority for a rule. Anything marked as a convention is ours, not the rule-maker's.
- State authority
- 8 Del. C. §242(b)(1)–(2) (opens in a new tab)Amending the charter: a board resolution, then the stockholders — and a class vote when a class's shares changeFree to read
- Background reading — not an authority
- NVCA Model Certificate of Incorporation (Oct. 2025), §3.3 (Preferred Stock Protective Provisions) (opens in a new tab)Protective provisions: what the company may not do without the preferredFree to read
The words this page teaches
Each links to its glossary definition, which also names the authority behind it and the components that render it.
- Protective provisionsActions the company may not take without the consent of a set majority of the preferred — selling the company, changing the charter against the preferred, creating a senior class, changing authorized shares, paying dividends, changing the board's size
- Authorized sharesThe number of shares a corporation's certificate of incorporation permits it to issue — the ceiling, not what anyone holds. Issued shares are those actually sold or granted; the authorized shares method of the Delaware franchise tax counts the ceiling