Nov 4, 2009
What percentage of the preferred stock is usually needed to waive a protective provision?
The restrictions of protective provisions are generally waivable by holders of a majority or supermajority of the preferred stock, although the specific percentage is often a point of negotiation between the company and the investors and among the investors themselves. For instance, a particular investor may wish to insure that it has the ability to block a waiver and will seek to have this percentage mathematically require that particular investor consent to the relevant action. Suppose one investor intends to purchase 40% of the preferred stock. In order for that investor to have the ability to block a particular action, the investor may seek an approval requirement of 66-2/3% of the preferred stock. The company and the other investors will, if possible, seek to avoid a particular investor having this potential blocking ability.
