This chapter discusses the process of registering and listing social enterprises, including Non-Profit Organizations (NPOs) and For-Profit Enterprises (FPEs), on Social Stock Exchanges (SSEs) in India. The primary purpose of SSEs is to provide a platform for social enterprises to raise funds while ensuring they meet specific regulatory requirements to promote transparency and accountability in the social sector.
1. Introduction to Social Stock Exchanges (SSEs)
As part of the SEBI (Securities and Exchange Board of India) regulations, two major stock exchanges, the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE), have launched their SSE wings: NSE SSE and BSE SSE. These exchanges are designed to facilitate fund-raising by social enterprises, promoting transparency and governance in the social impact sector.
2. Registration Process on Social Stock Exchanges
To list on an SSE, social enterprises must meet eligibility criteria and comply with SEBI regulations. The registration process helps in onboarding organizations that focus on social impact, especially in areas such as education, healthcare, and poverty alleviation.
Eligibility Requirements for Social Enterprises
- Social Impact Focus: The enterprise must primarily focus on social issues, with activities aligned with the 17 Sustainable Development Goals (SDGs).
- Target Populations: The activities should benefit underserved populations such as Scheduled Castes (SC), Scheduled Tribes (ST), and other disadvantaged groups.
- Revenue and Expenditure: At least 67% of the enterprise’s revenue or expenditure should be directed towards social impact activities for the target population.
3. Onboarding Process for NPOs
Not-for-Profit Organizations (NPOs) wishing to list on the SSE must fulfill specific legal and operational criteria, ensuring they meet minimum standards for transparency and accountability. These criteria include:
- Minimum Track Record: NPOs must have been operational for at least 3 years.
- Fund Flow Requirements: NPOs should have at least Rs. 50 lakh in annual spending and Rs. 10 lakh in funding in the past financial year.
- Compliance with Tax Laws: NPOs must be registered under the Income Tax Act and meet tax exemption criteria.
Table 1: Mandatory Registration Criteria for NPOs
| Parameter | Criteria |
|---|---|
| Legal Requirements | Registered as a charitable trust or company under Section 8 of the Companies Act, 2013 |
| Age of the NPO | Minimum 3 years of operation |
| Income Tax Compliance | Valid registration under Section 12A/12AA of the Income Tax Act |
| Minimum Fund Flow | Rs. 50 lakh in annual spending and Rs. 10 lakh in funding |
4. Rights, Obligations, and Disclosures
Once registered, social enterprises must adhere to specific rights and obligations. This includes making annual disclosures about their activities, financial health, and social impact. The Risk Disclosure Document (RDD) outlines potential risks, ensuring that investors understand the implications of supporting social enterprises.
5. Key Listing Guidelines
There are distinct listing requirements for For-Profit Enterprises (FPEs) and Not-for-Profit Organizations (NPOs):
- For-Profit Enterprises (FPEs): These must list their securities (equity or debt) on the appropriate exchange platform, such as the main board or SME platform.
- Not-for-Profit Organizations (NPOs): NPOs can choose to list or not but must still undergo a thorough registration and disclosure process.
Table 2: Differentiators for FPEs and NPOs
| Differentiator | FPEs | NPOs |
|---|---|---|
| Vision | Aligns with the organization’s objectives | Clear social impact goals |
| Strategy | Formulation towards achieving the vision | Plan to maximize social inclusion and impact |
| Governance | Governance structure and board details | Governance model ensuring transparency |
| Social Impact | Strategy and outcomes related to social change | Detailed social impact reports and plans |
6. Offer Documents and Pre-Listing Disclosures
Before listing, social enterprises must provide detailed offer documents, including financial statements, social impact reports, and governance details. These documents allow investors to assess the organization’s credibility and social impact.
Conclusion
The process of registration and listing on Social Stock Exchanges enables social enterprises to raise funds transparently and responsibly. By adhering to SEBI regulations, SSEs provide a regulated platform that helps in promoting social good while ensuring accountability. Through the clear structure and eligibility criteria, both NPOs and FPEs can gain recognition and support for their social missions.
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