SEBI has put forth a new proposal for social stock exchanges, which includes redefining the criteria for Not-for-Profit (NPO) organizations and expanding the scope of eligible activities for social enterprises.
Under the new framework, the list of permissible legal structures for NPOs will now include trusts registered under the Indian Registration Act, charitable societies registered under the relevant state laws, and companies registered under Section 25 of the Companies Act, 1956. Previously, NPOs were limited to social enterprises registered under specific trust, society, or company acts.
Additionally, the range of activities that can qualify as social enterprises will be broadened to encompass initiatives catering to disadvantaged children, women, elderly, disabled individuals, vocational skills development, and cultural promotion. The target segment for social entities may also be expanded to include cultural and environmental ecosystem entities.
To encourage more NPOs to register with social stock exchanges, SEBI has proposed a two-year registration window without the requirement to raise funds immediately. This aims to address the issue of NPOs not transitioning to listing or renewing their registration due to reporting costs, including social impact assessments.
Furthermore, the term “Social Impact Assessment Firm” will be replaced with “Social Impact Assessment Organization” to better reflect the nature of their work. Organizations with at least two full-time social impact assessors can now seek empanelment with self-regulatory bodies like ICAI, ICSI, or ICMAI.
SEBI has also suggested a condition where For-Profit or Not-for-Profit Social Enterprises must derive less than 20% of their revenues from business activities to qualify for the social stock exchange criteria. This is to ensure that at least 67% of their activities are focused on eligible social initiatives.
Other proposed changes include separate reporting structures for financial and non-financial aspects, revised timelines for annual disclosures, and segregated reporting for listed and non-listed projects.
As of December 31, a total of 111 NPOs were registered on the SSE segments of NSE-SSE and BSE-SSE, with 10 NPOs raising ₹22 crore through SSEs by issuing Zero Coupon Zero Principal instruments. These developments aim to streamline and enhance the functioning of social stock exchanges for the benefit of both NPOs and investors.
