Protective provisions and consent rights (class rights)

By Simon Walker

The venture capital investors in an investment round normally require that certain actions cannot be taken by the company without the consent of the holders of a majority (or other specific percentage) of their class or series of shares (investor majority). Sometimes these consent rights are split between consent of an investor majority, consent of the investor director(s) or consent of the board. Typically what requires investor majority consent and what requires investor director consent would relate to major changes in the company, such as those set out in the paragraph below, whereas operational matters that need more urgent consideration by the board would be left for board consent. Alternatively, each of the largest investors may have specific consent rights. The purpose of these rights is to protect the investors from the company taking actions that may adversely affect the value of their investment.

The types of actions covered include (among many others) changes to share classes and share rights, changes to the company’s capital structure, the issuance of new shares, mergers and acquisitions, the sale of major assets, winding up or liquidating the company, declaring dividends, incurring debts above a certain amount, appointing key members of the management team and materially changing the company’s business plan. These shareholder rights are particularly important for investors who do not appoint a director to the board of directors.

Note that in some continental European jurisdictions, local company law requires that some of the actions covered by these consent rights remain the unfettered right of the board of directors to decide. In such cases, the articles of association of the company will usually require that the level of majority needed for a board decision concerning these actions include the agreement of an appropriate number of the directors appointed by the investors…

Click on the link below to read the rest of the Taylor Wessing briefing.

Sign in or Register to continue reading this article

Sign in


It's quick, easy and free!

It takes just 5 minutes to register. Answer a few simple questions and once completed you’ll have instant access.

Register now

Why register to The Lawyer


Industry insight

In-depth, expert analysis into the stories behind the headlines from our leading team of journalists.


Market intelligence

Identify the major players and business opportunities within a particular region through our series of free, special reports.


Email newsletters

Receive your pick of The Lawyer's daily and weekly email newsletters, tailored by practice area, region and job function.

More relevant to you

To continue providing the best analysis, insight and news across the legal market we are collecting some information about who you are, what you do and where you work to improve The Lawyer and make it more relevant to you.

Briefings from Taylor Wessing

View more briefings from Taylor Wessing

Analysis from The Lawyer

  • merger deal

    Corporate crunch time: who will triumph at The Lawyer Awards 2014?

    As the equity capital markets rocketed back into favour and global M&A saw at least a partial return to form, there have been some rich pickings for The Lawyer’s Corporate Team of the Year award shortlisted firms in 2014. 

  • singapore orchid

    Singapore: Cash course

    The city-state is working hard to become a global wealth management hub, and law firms are gearing up for a prosperous new world

View more analysis from The Lawyer


5 New Street Square

Turnover (£m): 241.20
No. of lawyers: 860 (UK 200)
Jurisdiction: UK
No. of offices: 6
No. of qualified lawyers: 73 (International 50)
No. of partners: 29