AICD CDC / GAICD cheat sheet

Directors owe duties to the company as a legal entity, not to individual shareholders, employees, or the CEO.

Core statutory duties (Corporations Act 2001 (Cth) ss 180-183): care and diligence; good faith and proper purpose; no improper use of position; no improper use of information.

Business judgment rule (s 180(2)): a defence where the director acts in good faith, on an informed basis, without material personal interest, and rationally believes the judgment is in the company's best interests.

Insolvent trading (s 588G): a director contravenes if, at the time a debt is incurred, there are reasonable grounds for suspecting insolvency; safe harbour (s 588GA) applies to a course of action reasonably likely to lead to a better outcome than immediate administration.

Care and diligence standard is objective (s 180(1)): the degree of care and diligence a reasonable person would exercise in that office, in that company's circumstances.

Duty to prevent insolvent trading and duty to act in good faith are non-delegable; directors may rely on others (s 189) only if reliance is made in good faith and after independent assessment.

Conflicts: material personal interest requires disclosure to the board (s 191); a related-party benefit generally requires member approval (Chapter 2E).

ASX Corporate Governance Principles (4th ed., 2019): eight principles, applied on an 'if not, why not' basis; Recommendation 2.4 requires a majority of independent directors on the board of a listed entity.

Director independence indicators (ASX Rec 2.1 box): not a substantial shareholder, no material contractual relationship, not employed by the entity or its auditor within the last three years, no close family ties to such persons.

Quorum is set by the constitution or by board resolution; a meeting without quorum cannot validly transact business.

A board resolution passed at a properly convened meeting requires a majority of votes cast by directors present and voting; the chair typically has a casting vote if the constitution so provides.

A circulating (circular) resolution is valid only if the constitution or statute permits it; under the Corporations Act a directors' resolution may be passed without a meeting if all directors entitled to vote sign the document (s 248A).

Board committees (audit, risk, remuneration, nomination) operate under delegated authority; the board cannot delegate ultimate responsibility for strategy and oversight.

Board evaluation: effective practice includes annual review of board, committee, and individual director performance, with an independent facilitator periodically.

Meeting hygiene: agenda circulated in advance, minutes record decisions and reasons, action items tracked with owners and dates, and conflicts declared and minuted.

Separation of roles: the chair leads the board and manages its effectiveness; the CEO manages the organisation. Combining chair and CEO roles concentrates power and is discouraged under ASX Rec 2.5.

Board composition: skills matrix maps required competencies to current directors; director tenure and renewal planning address independence and diversity.

Information flow: directors are entitled to reasonable access to company records and to management; access to independent professional advice at company expense is typically provided for in the constitution.

Strategy setting is a non-delegable board function: approve mission, strategic plan, annual budget, and key performance indicators, and monitor performance against them.

Risk appetite is the amount and type of risk the board is willing to accept in pursuit of strategy; risk tolerance is the acceptable variation around that appetite.

Enterprise risk management (ISO 31000): risk = effect of uncertainty on objectives; process is communicate/consult, establish context, identify, analyse, evaluate, treat, monitor and review.

Risk treatment options: avoid, reduce (mitigate), transfer (insurance, contracts), accept, and exploit (for opportunities).

Three lines model: first line owns and manages risk; second line provides oversight, frameworks, and compliance; third line is internal audit providing independent assurance.

ASX Principle 7: the board should have a risk committee (or equivalent) and disclose whether it has a material exposure to environmental or social risks; Recommendation 7.1 requires a sound risk management framework.

Stress testing and scenario analysis test strategy resilience against plausible adverse events (e.g., liquidity shock, cyber incident, key customer loss).

Key risk indicators (KRIs) are leading metrics with thresholds that trigger escalation to the board before a risk event crystallises.

Strategic risk differs from operational risk: strategic risk arises from wrong or misaligned strategic choices, competitive shifts, or disruptive change, not from process failure.

The board approves the annual budget and monitors performance against it; variance analysis compares actual to budget and prior period, with explanations for material variances.

Key financial statements: statement of financial position (balance sheet), statement of profit or loss and other comprehensive income, statement of cash flows, and statement of changes in equity.

Accrual accounting recognises revenue when earned and expenses when incurred, not when cash moves; cash flow can diverge materially from profit.

Liquidity vs solvency: liquidity is ability to meet short-term obligations; solvency is ability to pay debts as they fall due. Both are board-level concerns.

Key ratios: current ratio = current assets / current liabilities; quick ratio excludes inventory; debt-to-equity = total liabilities / total equity; interest cover = EBIT / interest expense.

Return measures: return on equity = net profit / shareholders' equity; return on assets = net profit / total assets; EBITDA margin = EBITDA / revenue.

Audit: the external auditor is appointed by and reports to shareholders; the audit committee oversees the relationship and auditor independence, including non-audit services.

Continuous disclosure (Corporations Act s 674; ASX Listing Rule 3.1): a listed entity must immediately disclose information a reasonable person would expect to have a material effect on price or value, subject to carve-outs.

Directors' declaration: the board must declare, per s 295(4), whether in its opinion the financial statements comply with accounting standards and give a true and fair view, and whether there are reasonable grounds to believe the company can pay its debts.

Tone at the top: directors' behaviour sets the cultural norm; culture is measured through conduct indicators, staff surveys, whistleblower reports, and remuneration outcomes.

Code of conduct should cover conflicts of interest, gifts and benefits, confidentiality, fair dealing, and speaking up; it applies to directors, management, and employees.

Whistleblower protections: Corporations Act Part 9.4AAA protects eligible whistleblowers (current/former officers, employees, contractors, suppliers, associates, relatives) from detriment and provides confidentiality.

Stakeholder mapping identifies each stakeholder's interest, influence, and expectations; materiality assessment determines which environmental, social, and governance matters are reported.

Modern slavery reporting (Commonwealth Modern Slavery Act 2018) applies to entities with annual consolidated revenue of at least $100 million; statements cover operations and supply chains.

Remuneration should align executive pay with long-term shareholder value; ASX Rec 8.2 requires a remuneration committee of at least three members, a majority independent, chaired by an independent director.

Sustainability reporting: IFRS S1 and S2 (issued by the ISSB in 2023) cover general sustainability-related disclosures and climate-related disclosures respectively.

Ethical decision test: is it legal, is it consistent with the code and values, would it withstand public scrutiny, and who is harmed or benefited?

Stakeholder engagement is continuous, not annual: the board should hear stakeholder views directly, particularly from employees, customers, and community, and reflect them in strategy and risk.

Directors owe duties to the company as a legal entity, not to individual shareholders, employees, or the CEO.

Core statutory duties (Corporations Act 2001 (Cth) ss 180-183): care and diligence; good faith and proper purpose; no improper use of position; no improper use of information.

Business judgment rule (s 180(2)): a defence where the director acts in good faith, on an informed basis, without material personal interest, and rationally believes the judgment is in the company's best interests.

Insolvent trading (s 588G): a director contravenes if, at the time a debt is incurred, there are reasonable grounds for suspecting insolvency; safe harbour (s 588GA) applies to a course of action reasonably likely to lead to a better outcome than immediate administration.

Care and diligence standard is objective (s 180(1)): the degree of care and diligence a reasonable person would exercise in that office, in that company's circumstances.

Duty to prevent insolvent trading and duty to act in good faith are non-delegable; directors may rely on others (s 189) only if reliance is made in good faith and after independent assessment.

Conflicts: material personal interest requires disclosure to the board (s 191); a related-party benefit generally requires member approval (Chapter 2E).

ASX Corporate Governance Principles (4th ed., 2019): eight principles, applied on an 'if not, why not' basis; Recommendation 2.4 requires a majority of independent directors on the board of a listed entity.

Director independence indicators (ASX Rec 2.1 box): not a substantial shareholder, no material contractual relationship, not employed by the entity or its auditor within the last three years, no close family ties to such persons.

Quorum is set by the constitution or by board resolution; a meeting without quorum cannot validly transact business.

A board resolution passed at a properly convened meeting requires a majority of votes cast by directors present and voting; the chair typically has a casting vote if the constitution so provides.

A circulating (circular) resolution is valid only if the constitution or statute permits it; under the Corporations Act a directors' resolution may be passed without a meeting if all directors entitled to vote sign the document (s 248A).

Board committees (audit, risk, remuneration, nomination) operate under delegated authority; the board cannot delegate ultimate responsibility for strategy and oversight.

Board evaluation: effective practice includes annual review of board, committee, and individual director performance, with an independent facilitator periodically.

Meeting hygiene: agenda circulated in advance, minutes record decisions and reasons, action items tracked with owners and dates, and conflicts declared and minuted.

Separation of roles: the chair leads the board and manages its effectiveness; the CEO manages the organisation. Combining chair and CEO roles concentrates power and is discouraged under ASX Rec 2.5.

Board composition: skills matrix maps required competencies to current directors; director tenure and renewal planning address independence and diversity.

Information flow: directors are entitled to reasonable access to company records and to management; access to independent professional advice at company expense is typically provided for in the constitution.

Strategy setting is a non-delegable board function: approve mission, strategic plan, annual budget, and key performance indicators, and monitor performance against them.

Risk appetite is the amount and type of risk the board is willing to accept in pursuit of strategy; risk tolerance is the acceptable variation around that appetite.

Enterprise risk management (ISO 31000): risk = effect of uncertainty on objectives; process is communicate/consult, establish context, identify, analyse, evaluate, treat, monitor and review.

Risk treatment options: avoid, reduce (mitigate), transfer (insurance, contracts), accept, and exploit (for opportunities).

Three lines model: first line owns and manages risk; second line provides oversight, frameworks, and compliance; third line is internal audit providing independent assurance.

ASX Principle 7: the board should have a risk committee (or equivalent) and disclose whether it has a material exposure to environmental or social risks; Recommendation 7.1 requires a sound risk management framework.

Stress testing and scenario analysis test strategy resilience against plausible adverse events (e.g., liquidity shock, cyber incident, key customer loss).

Key risk indicators (KRIs) are leading metrics with thresholds that trigger escalation to the board before a risk event crystallises.

Strategic risk differs from operational risk: strategic risk arises from wrong or misaligned strategic choices, competitive shifts, or disruptive change, not from process failure.

The board approves the annual budget and monitors performance against it; variance analysis compares actual to budget and prior period, with explanations for material variances.

Key financial statements: statement of financial position (balance sheet), statement of profit or loss and other comprehensive income, statement of cash flows, and statement of changes in equity.

Accrual accounting recognises revenue when earned and expenses when incurred, not when cash moves; cash flow can diverge materially from profit.

Liquidity vs solvency: liquidity is ability to meet short-term obligations; solvency is ability to pay debts as they fall due. Both are board-level concerns.

Key ratios: current ratio = current assets / current liabilities; quick ratio excludes inventory; debt-to-equity = total liabilities / total equity; interest cover = EBIT / interest expense.

Return measures: return on equity = net profit / shareholders' equity; return on assets = net profit / total assets; EBITDA margin = EBITDA / revenue.

Audit: the external auditor is appointed by and reports to shareholders; the audit committee oversees the relationship and auditor independence, including non-audit services.

Continuous disclosure (Corporations Act s 674; ASX Listing Rule 3.1): a listed entity must immediately disclose information a reasonable person would expect to have a material effect on price or value, subject to carve-outs.

Directors' declaration: the board must declare, per s 295(4), whether in its opinion the financial statements comply with accounting standards and give a true and fair view, and whether there are reasonable grounds to believe the company can pay its debts.

Tone at the top: directors' behaviour sets the cultural norm; culture is measured through conduct indicators, staff surveys, whistleblower reports, and remuneration outcomes.

Code of conduct should cover conflicts of interest, gifts and benefits, confidentiality, fair dealing, and speaking up; it applies to directors, management, and employees.

Whistleblower protections: Corporations Act Part 9.4AAA protects eligible whistleblowers (current/former officers, employees, contractors, suppliers, associates, relatives) from detriment and provides confidentiality.

Stakeholder mapping identifies each stakeholder's interest, influence, and expectations; materiality assessment determines which environmental, social, and governance matters are reported.

Modern slavery reporting (Commonwealth Modern Slavery Act 2018) applies to entities with annual consolidated revenue of at least $100 million; statements cover operations and supply chains.

Remuneration should align executive pay with long-term shareholder value; ASX Rec 8.2 requires a remuneration committee of at least three members, a majority independent, chaired by an independent director.

Sustainability reporting: IFRS S1 and S2 (issued by the ISSB in 2023) cover general sustainability-related disclosures and climate-related disclosures respectively.

Ethical decision test: is it legal, is it consistent with the code and values, would it withstand public scrutiny, and who is harmed or benefited?

Stakeholder engagement is continuous, not annual: the board should hear stakeholder views directly, particularly from employees, customers, and community, and reflect them in strategy and risk.

Directors owe duties to the company as a legal entity, not to individual shareholders, employees, or the CEO.

Core statutory duties (Corporations Act 2001 (Cth) ss 180-183): care and diligence; good faith and proper purpose; no improper use of position; no improper use of information.

Business judgment rule (s 180(2)): a defence where the director acts in good faith, on an informed basis, without material personal interest, and rationally believes the judgment is in the company's best interests.

Insolvent trading (s 588G): a director contravenes if, at the time a debt is incurred, there are reasonable grounds for suspecting insolvency; safe harbour (s 588GA) applies to a course of action reasonably likely to lead to a better outcome than immediate administration.

Care and diligence standard is objective (s 180(1)): the degree of care and diligence a reasonable person would exercise in that office, in that company's circumstances.

Duty to prevent insolvent trading and duty to act in good faith are non-delegable; directors may rely on others (s 189) only if reliance is made in good faith and after independent assessment.

Conflicts: material personal interest requires disclosure to the board (s 191); a related-party benefit generally requires member approval (Chapter 2E).

ASX Corporate Governance Principles (4th ed., 2019): eight principles, applied on an 'if not, why not' basis; Recommendation 2.4 requires a majority of independent directors on the board of a listed entity.

Director independence indicators (ASX Rec 2.1 box): not a substantial shareholder, no material contractual relationship, not employed by the entity or its auditor within the last three years, no close family ties to such persons.

Quorum is set by the constitution or by board resolution; a meeting without quorum cannot validly transact business.

A board resolution passed at a properly convened meeting requires a majority of votes cast by directors present and voting; the chair typically has a casting vote if the constitution so provides.

A circulating (circular) resolution is valid only if the constitution or statute permits it; under the Corporations Act a directors' resolution may be passed without a meeting if all directors entitled to vote sign the document (s 248A).

Board committees (audit, risk, remuneration, nomination) operate under delegated authority; the board cannot delegate ultimate responsibility for strategy and oversight.

Board evaluation: effective practice includes annual review of board, committee, and individual director performance, with an independent facilitator periodically.

Meeting hygiene: agenda circulated in advance, minutes record decisions and reasons, action items tracked with owners and dates, and conflicts declared and minuted.

Separation of roles: the chair leads the board and manages its effectiveness; the CEO manages the organisation. Combining chair and CEO roles concentrates power and is discouraged under ASX Rec 2.5.

Board composition: skills matrix maps required competencies to current directors; director tenure and renewal planning address independence and diversity.

Information flow: directors are entitled to reasonable access to company records and to management; access to independent professional advice at company expense is typically provided for in the constitution.

Strategy setting is a non-delegable board function: approve mission, strategic plan, annual budget, and key performance indicators, and monitor performance against them.

Risk appetite is the amount and type of risk the board is willing to accept in pursuit of strategy; risk tolerance is the acceptable variation around that appetite.

Enterprise risk management (ISO 31000): risk = effect of uncertainty on objectives; process is communicate/consult, establish context, identify, analyse, evaluate, treat, monitor and review.

Risk treatment options: avoid, reduce (mitigate), transfer (insurance, contracts), accept, and exploit (for opportunities).

Three lines model: first line owns and manages risk; second line provides oversight, frameworks, and compliance; third line is internal audit providing independent assurance.

ASX Principle 7: the board should have a risk committee (or equivalent) and disclose whether it has a material exposure to environmental or social risks; Recommendation 7.1 requires a sound risk management framework.

Stress testing and scenario analysis test strategy resilience against plausible adverse events (e.g., liquidity shock, cyber incident, key customer loss).

Key risk indicators (KRIs) are leading metrics with thresholds that trigger escalation to the board before a risk event crystallises.

Strategic risk differs from operational risk: strategic risk arises from wrong or misaligned strategic choices, competitive shifts, or disruptive change, not from process failure.

The board approves the annual budget and monitors performance against it; variance analysis compares actual to budget and prior period, with explanations for material variances.

Key financial statements: statement of financial position (balance sheet), statement of profit or loss and other comprehensive income, statement of cash flows, and statement of changes in equity.

Accrual accounting recognises revenue when earned and expenses when incurred, not when cash moves; cash flow can diverge materially from profit.

Liquidity vs solvency: liquidity is ability to meet short-term obligations; solvency is ability to pay debts as they fall due. Both are board-level concerns.

Key ratios: current ratio = current assets / current liabilities; quick ratio excludes inventory; debt-to-equity = total liabilities / total equity; interest cover = EBIT / interest expense.

Return measures: return on equity = net profit / shareholders' equity; return on assets = net profit / total assets; EBITDA margin = EBITDA / revenue.

Audit: the external auditor is appointed by and reports to shareholders; the audit committee oversees the relationship and auditor independence, including non-audit services.

Continuous disclosure (Corporations Act s 674; ASX Listing Rule 3.1): a listed entity must immediately disclose information a reasonable person would expect to have a material effect on price or value, subject to carve-outs.

Directors' declaration: the board must declare, per s 295(4), whether in its opinion the financial statements comply with accounting standards and give a true and fair view, and whether there are reasonable grounds to believe the company can pay its debts.

Tone at the top: directors' behaviour sets the cultural norm; culture is measured through conduct indicators, staff surveys, whistleblower reports, and remuneration outcomes.

Code of conduct should cover conflicts of interest, gifts and benefits, confidentiality, fair dealing, and speaking up; it applies to directors, management, and employees.

Whistleblower protections: Corporations Act Part 9.4AAA protects eligible whistleblowers (current/former officers, employees, contractors, suppliers, associates, relatives) from detriment and provides confidentiality.

Stakeholder mapping identifies each stakeholder's interest, influence, and expectations; materiality assessment determines which environmental, social, and governance matters are reported.

Modern slavery reporting (Commonwealth Modern Slavery Act 2018) applies to entities with annual consolidated revenue of at least $100 million; statements cover operations and supply chains.

Remuneration should align executive pay with long-term shareholder value; ASX Rec 8.2 requires a remuneration committee of at least three members, a majority independent, chaired by an independent director.

Sustainability reporting: IFRS S1 and S2 (issued by the ISSB in 2023) cover general sustainability-related disclosures and climate-related disclosures respectively.

Ethical decision test: is it legal, is it consistent with the code and values, would it withstand public scrutiny, and who is harmed or benefited?

Stakeholder engagement is continuous, not annual: the board should hear stakeholder views directly, particularly from employees, customers, and community, and reflect them in strategy and risk.