SEBI proposes Rs 1,000 minimum investment in Social Impact Funds, eases norms for NPOs on Social Stock Exchange

SEBI proposes Rs 1,000 minimum investment in Social Impact Funds, eases norms for NPOs on Social Stock Exchange

• SEBI proposes reducing SIF minimum investment from Rs 2 lakh to Rs 1,000 for individuals
• NPO registration on SSE may extend from 2 to 3 years without fundraising
• Minimum subscription for ZCZP issuances could drop from 75 percent to 50 percent

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Markets regulator SEBI has proposed a steep reduction in the minimum investment threshold for individual investors in Social Impact Funds (SIFs) and a relaxation of key compliance norms for not-for-profit organisations (NPOs) under the Social Stock Exchange (SSE) framework, as part of efforts to broaden participation and ease fundraising.

In a consultation paper issued on Monday, SEBI proposed lowering the minimum investment by individual investors in SIFs from Rs 2 lakh to Rs1,000, where such funds invest exclusively in securities issued by NPOs registered or listed on the SSE. The proposal seeks to align the Alternative Investment Fund (AIF) framework with the minimum application size for Zero Coupon Zero Principal (ZCZP) instruments under the ICDR Regulations for NPOs.

The move is aimed at attracting small investors and improving capital flows to social enterprises through pooled investment vehicles, SEBI said. SEBI paper stated, “The proposed reduction in the minimum value of investment would enable the SIFs to attract small investors to invest in the securities of the NPOs through the SIF”.

SEBI has also proposed extending the registration period for NPOs on the SSE from two years to three years, without raising funds, subject to approval by the social stock exchanges. The extension is intended to address operational challenges faced by NPOs, including delays in tax registration renewals and other statutory approvals.

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The regulator has also proposed easing the minimum subscription requirement for ZCZP issuances. SEBI has proposed the minimum subscription threshold to be reduced from 75 percent to 50 percent for projects where costs and outcomes can be clearly implemented on a per-unit basis. To ensure that partial subscription does not adversely affect the project implementation and that the issue proceeds are meaningfully deployed towards the intended objects of the project in the fund-raising document. However, such relaxation will be subject to due diligence by the SSEs.

SEBI said the changes were recommended by the Social Stock Exchange Advisory Committee after reviewing the existing framework to strengthen the SSE ecosystem and improve fundraising outcomes for social enterprises.

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