Bombay Stock exchange (BSE) on October 7 announced that it has got an in-principle nod from the Securities and Exchange Board of India (SEBI) for the social stock exchange (SSE) as a separate segment.
Key points
- The social stock exchange (SSE) is a novel concept in India and such a bourse is meant to serve the private and non-profit sectors by channelling greater capital to them.
- The idea of SSE was first floated by Finance Minister Nirmala Sitharaman in her Budget speech for the financial year 2019-20.
- In July 2022, the SEBI notified rules for Social Stock Exchange (SSE) to provide social enterprises with an additional avenue to raise funds.
- Social enterprises (SEs) eligible to participate in the SSE will be entities, non-profit organisations (NPOs) and for-profit social enterprises having social intent and impact as their primary goal.
- Such an intent should be demonstrated through its focus on eligible social objectives for the underserved or less privileged populations or regions.
- This impact is generated by the project or solution for which funds have been raised on SSE.
- The social enterprises will have to engage in a social activity out of 16 broad activities listed by the SEBI.
- The eligible activities include eradicating hunger, poverty, malnutrition and inequality; promoting healthcare, supporting education, employability and livelihoods; gender equality empowerment of women and LGBTQIA+ communities; and supporting social enterprise incubators.
- Corporate foundations, political or religious organisations or activities, professional or trade associations, infrastructure and housing companies, except affordable housing, will not be eligible to be identified as a social enterprise.
- Under the new rules, SSE will be a separate segment of the existing stock exchanges.
- In September 2022, SEBI came out with a detailed framework for SSE, specifying minimum requirements for a Not-for-Profit Organisation (NPO) for registering with the exchanges and disclosure requirements.
- The SEBI specified minimum requirements to be met by a NPO for registration with SSE, disclosure requirement for NPOs raising funds through the issuance of zero-coupon zero principal instruments and put in place annual disclosure requirements that needs to be made by NPOs on such exchanges.
- With regard to minimum requirements, NPO needs to be registered as a charitable trust and should be registered for at least 3 years, must have spent at least Rs 50 lakh annually in the past financial year and should have received a funding of at least Rs10 lakh in the past financial year.
- The listed NPO will have to submit a statement of the utilisation of funds to SSE, as mandated under SEBI’s rules, within 45 days from the end of the quarter.
- SEBI has asked social enterprises raising funds using SSE to disclose the Annual Impact Report (AIR) within 90 days from the end of the financial year, capturing the qualitative and quantitative aspects of the social impact generated by the entity and, where applicable.
