AICD CDC / GAICD flashcards
AICD CDC / GAICD · Build recall with a focused review session.
32 cards. Read the term and the definition here. The deck at the top of this page is optional.
- Business judgment rule
- A statutory defence under s 180(2) of the Corporations Act: a director who makes an informed, good-faith judgment, free of material personal interest, and rationally believes it serves the company, does not breach the duty of care.
- Insolvent trading
- A contravention under s 588G where a director allows a company to incur a debt while there are reasonable grounds for suspecting it is insolvent, or becomes insolvent by incurring that debt.
- Material personal interest
- A director's interest that could conflict with the company's interests and must be disclosed to the board under s 191; the director generally must not vote or be present while the matter is considered.
- Independent director
- A director free of relationships that could materially interfere with independent judgment, such as recent employment, material contracts, substantial shareholding, or close family ties to such persons.
- Related party transaction
- A financial benefit given to a director, their spouse, or a related entity, generally requiring shareholder approval under Chapter 2E unless an exception applies, such as arm's-length terms.
- Duty of good faith
- The obligation to act honestly and in the company's best interests, and for proper purposes, rather than to advance a director's own interests or those of a particular shareholder group.
- Safe harbour
- A defence under s 588GA available when directors develop a course of action reasonably likely to lead to a better outcome for the company than immediate administration or liquidation.
- Board quorum
- The minimum number of directors who must be present for a board meeting to validly transact business, set by the constitution or by board resolution.
- Casting vote
- A second, deciding vote exercisable by the chair when votes on a resolution are tied, available only where the constitution or governing rules expressly provide for it.
- Circular resolution
- A resolution passed without a meeting; under s 248A it is valid only when every director entitled to vote signs the document, unless the constitution allows otherwise.
- Board skills matrix
- A tool mapping the competencies, experience, and diversity the board needs against those its directors actually possess, guiding recruitment, succession, and renewal decisions.
- Board effectiveness review
- A structured evaluation of board, committee, and individual director performance, ideally conducted annually and periodically facilitated independently to test whether the board is functioning well.
- Chair-CEO separation
- The practice of separating the board leadership role from executive management, preventing concentration of power; ASX Recommendation 2.5 discourages a single person holding both roles.
- Risk appetite
- The amount and type of risk a board is willing to accept in pursuing its strategy, expressed through statements and limits that guide management decisions across the organisation.
- Risk tolerance
- The acceptable level of variation around the board's stated risk appetite, setting the boundaries within which management may operate before escalation is required.
- Three lines model
- A governance structure where operational management owns risk, a risk and compliance function provides oversight, and internal audit gives independent assurance to the board.
- Key risk indicator
- A leading metric with defined thresholds that signals rising exposure to a specific risk, enabling the board to act before the risk event materialises.
- Strategic risk
- The risk that strategic choices are wrong or misaligned with the environment, arising from competitive shifts, disruption, or poor decisions rather than process failure.
- Risk treatment options
- The choices available for addressing risk: avoid the activity, reduce or mitigate it, transfer it through insurance or contracts, accept it, or exploit it for opportunity.
- Current ratio
- A liquidity measure calculated as current assets divided by current liabilities; a ratio below one suggests short-term obligations exceed assets expected to convert to cash within a year.
- Interest cover
- A solvency-related ratio calculated as earnings before interest and tax divided by interest expense, showing how many times operating earnings can meet interest obligations.
- Continuous disclosure
- The obligation under s 674 and ASX Listing Rule 3.1 for a listed entity to immediately disclose price-sensitive information, subject to limited carve-outs such as incomplete negotiations.
- Directors' declaration
- A formal statement under s 295(4) that the financial statements comply with accounting standards and give a true and fair view, and that there are reasonable grounds to believe the company is solvent.
- Audit committee
- A board committee overseeing financial reporting, external audit, internal audit, and auditor independence, typically composed of independent non-executive directors with financial expertise.
- Accrual accounting
- A method recognising revenue when earned and expenses when incurred, regardless of cash timing, meaning reported profit can differ materially from cash flow.
- Solvency versus liquidity
- Solvency is the ability to pay debts as they fall due over the longer term; liquidity is the ability to meet short-term obligations. Both are core board oversight concerns.
- Tone at the top
- The cultural signal sent by directors and senior executives through their behaviour, decisions, and priorities, which shapes whether ethical conduct is rewarded or tolerated.
- Whistleblower protection
- Safeguards under Part 9.4AAA of the Corporations Act protecting eligible whistleblowers from detriment and retaliation, and requiring confidentiality of their identity and disclosures.
- Stakeholder materiality
- An assessment determining which environmental, social, and governance matters are significant enough to stakeholders and to the business to warrant disclosure and board attention.
- Modern slavery reporting
- A statutory requirement under the Modern Slavery Act 2018 for entities with annual consolidated revenue of at least $100 million to report on modern slavery risks in operations and supply chains.
- Remuneration committee
- A board committee overseeing executive pay and incentive design; ASX Recommendation 8.2 requires at least three members, a majority independent, chaired by an independent director.
- Code of conduct
- A formal statement of expected behaviour covering conflicts of interest, gifts, confidentiality, fair dealing, and speaking up, binding on directors, management, and employees.