ICSB CS Professional flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

Duty of care

Fiduciary obligation requiring directors to act on an informed basis, with the diligence a reasonably prudent person would exercise in comparable circumstances, including adequate preparation before decisions.

Business judgment rule

A deferential standard under which courts uphold board decisions made in good faith, on an informed basis, and without self-interest, even if the outcome later proves poor.

Independent director

A director free of material relationships with the company, its management, or controlling shareholders, including employment, family ties, or significant fees, that could impair objective judgment.

Board quorum

The minimum number of directors whose presence is required for the board validly to transact business, fixed by the constitution, articles, or bylaws.

Separation of chair and CEO

A governance structure in which different individuals lead the board and executive management, reducing concentration of authority and strengthening board oversight.

Audit committee role

A board committee of independent directors responsible for overseeing financial reporting, external audit appointment and independence, internal audit, and the internal control framework.

Separate legal personality

The principle that a company is a legal entity distinct from its shareholders, directors, and officers, capable of owning property, contracting, and suing in its own name.

Capital maintenance rule

The doctrine that a company may not return capital to shareholders except through lawful distributions from distributable profits or a formal capital reduction procedure.

Wrongful trading

Liability arising when directors continue to trade after they knew or ought to have concluded that insolvent liquidation was unavoidable, without taking steps to minimise creditor loss.

Special resolution

A shareholder resolution requiring a supermajority, commonly 75 percent of votes cast, used for constitutional amendments, capital reductions, and other fundamental changes.

Ultra vires act

An act beyond the objects or powers conferred on the company; it may bind the company to a good-faith third party but remains a breach of duty internally.

Statutory registers

Mandatory company records including the register of members, directors, secretaries, charges, and beneficial owners, which must be kept accurate and open to inspection as prescribed.

Minutes as evidence

A record of proceedings that serves as prima facie evidence that the meeting occurred, quorum was present, and the resolutions recorded were validly passed.

Share transfer registration

The process of lodging a transfer instrument, obtaining board approval, updating the register of members, and issuing a new certificate within the statutory period.

Record date

The cutoff date fixed by the board for determining which shareholders are entitled to receive a dividend or to vote at a forthcoming meeting.

Annual return filing

A periodic statutory filing confirming a company's registered particulars, directors, and share capital as at a specified date, subject to strict deadlines and automatic penalties.

Comply or explain

A governance code mechanism under which listed companies must either meet each code provision or publicly disclose and justify any departure from it.

Say-on-pay vote

A shareholder vote on executive remuneration, commonly advisory and annual on implementation, with periodic votes on the remuneration policy itself.

Board evaluation

A structured annual review of board, committee, and individual director effectiveness, often externally facilitated at intervals specified by the applicable governance code.

Apply and explain

A principle-based code model in which entities apply governance principles proportionately and explain in their annual report how each principle has been applied.

Three lines model

A risk governance structure in which management owns risk, a risk and compliance function provides oversight, and internal audit gives independent assurance to the board.

Residual risk

The level of risk remaining after existing controls have been applied, as distinct from inherent risk assessed before controls are considered.

Risk appetite

The amount and type of risk an organisation is willing to accept in pursuit of its objectives, expressed in a statement approved by the board.

Segregation of duties

A preventive control separating authorisation, custody, and recording of transactions among different individuals to reduce the opportunity for error or fraud.

Material weakness

A deficiency, or combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement will not be prevented or detected timely.

Fraud triangle

A model describing three conditions that drive fraud: pressure or incentive, opportunity, and rationalisation; controls primarily reduce opportunity.

Facilitation payment

A small payment to a low-level official to expedite a routine, non-discretionary action; prohibited under several major anti-corruption laws and not a lawful exception.

Conflict of interest

A situation where a professional's personal, financial, or other interest could improperly influence judgment; the response is disclosure, recusal, and documentation.

Whistleblowing channel

A confidential, independently operated reporting mechanism allowing employees and third parties to raise concerns, with protection from retaliation and documented investigation.

Professional scepticism

An attitude of questioning and verification rather than acceptance, requiring governance professionals to corroborate representations and document the basis for judgments.

Proxy voting

A mechanism allowing a shareholder to appoint another person to attend and vote at a meeting on their behalf, typically through a form permitting directed or withheld votes.

Stewardship code

A framework requiring institutional investors to disclose voting policies, monitor investee companies, engage on governance matters, and report how votes were cast.