Sebi shares framework for Social Stock Exchange for listing of non-profit firms

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Market regulator Securities and Exchange Board of India (Sebi) on September 19 shared the framework for Social Stock Exchange (SSE), which would allow the listing of non-profit organisations (NPOs).

The NPOs which are desirous of being listed should be registered as a non-profit entity, and the registration certificate must be valid for the next 12 months, Sebi stated in its circular.

The entities must be registered in India as a "charitable trust registered under the public trust statute of the relevant state" or under the Societies Registration Act, 1860, or the Indian Trusts Act, 1882, or incorporated as a company under Section 8 of the Companies Act, 2013, the circular noted.

The NPOs would also be required to declare whether they are owned by the government or held privately, it added, further stating that the age of the organisation should be a "minimum of three years".

They should have a valid 80G registration under the Income Tax Act, as per the circular. The NPOs' minimum spending in the last fiscal should be Rs 50 lakh, and a minimum funding of Rs 10 lakh in the past financial year, it added.

"SSE under the guidance of SSE Governing Council (SGC) shall mandate the structure of the draft fund raising document/ final fund raising document. SSE shall host such requirements on its website," Sebi further said.

The information which the SSE will be mandated to collect will include the NPO's vision. strategy, details of key management personnel, financial statements for the last three years, and the risks that the NPO sees to its work.

Sebi had invited public comments for the proposed SSE in July 2020, days after a panel constituted by it had recommended the direct listing of NPOs through the issuance of bonds and a range of funding mechanisms. Developed countries like the UK, Canada and Brazil have SSEs.

The size of the market is considered to be large as India has over 31 lakh NPOs – which amounts to around one NPO for 400 Indians.

A draft Sebi report in 2020 had stated that the SSE may be helpful in rebuilding the livelihoods of people who are affected during pandemics like COVID-19.

"The SSEs will aim at unlocking large pools of social capital, and encourage blended finance structures, so that conventional capital can partner with social capital to address the urgent challenges of COVID-19," it had said.