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SEBI Circular on framework on Social Stock Exchange – 19th September, 2022
Mehta & Mehta > SEBI Updates > SEBI Circular on framework on Social Stock Exchange – 19th September, 2022
SEBI, vide its circular dated 19th September, 2022 came out with framework on Social Stock exchange specifying minimum requirements to be met by a Not for Profit Organization for registration with SSE in terms of Regulation 292F of the ICDR Regulations. This circular is applicable to all Recognized Stock exchanges, Recognized Depositories, Merchant Bankers and Brokers registered with SEBI, Social Enterprises, Social Impact Fund Registered with SEBI and Social Audit Firms of Chartered Accountants of India.
Minimum requirements to be met by a Not for Profit Organization (NPO) for registration with SSE in terms of Regulation 292F of the ICDR Regulations
Broad ParameterIndicatorDetailsLegal Requirements Entity is registered as an NPO Registration certificate valid at least for next 12 months at the time of seeking registration with SSE Entities must be registered in India as one of the below: a. a charitable trust registered under the public trust statue of the relevant state; b. a charitable trust registered under the Societies Registration Act, 1860 c. a charitable trust registered under the Indian Trusts Act, 1882 d. a company incorporated under section 8 of the Companies Act, 2013 Disclose if NPO is owned and/or controlled by government or private Governing document (MoA & AoA/ Trust Deed/ Bye-laws/ Constitution) Disclose if NPO is owned and/or controlled by government or private Exemption under Income Tax Act Registration Certificate under section 12A/12AA/12AB under Income Tax Act, 1961 Registration Certificate under section 12A/12AA/12AB to be valid for at least the next 12 months. Does not have a notice or ongoing scrutiny by Income Tax. Registration with Income Tax as an NPO IT PAN Valid IT PAN Age of the NPO Registration certificate Minimum 3 years Deduction under Income Tax Act, 1960 Valid 80G registration under Income Tax Act, 1961. Entity to ensure whether tax deduction is available or not to investors. Eligible to be Social Enterprise Requirements with Regulation 292E of ICDR Regulations As may be specified by SSE Minimum Fund Flows Annual Spending in the past financial year Receipts or Payments from Audited accounts/ Fund Flow Statement Must be at least Rs. 50 lakhs Funding in the past financial year Receipts from Audited accounts/ Fund Flow Statement Must be at least Rs. 10 lakhs
B. Minimum Initial Disclosure Requirement for NPOs raising funds through the issuance of Zero Coupon Zero Principal Instruments in terms of Regulation 292K(1) of the ICDR Regulations
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. SSE shall ensure that the documents contain the following minimum disclosures: VisionTarget SegmentStrategyGovernanceManagementOperationsFinanceComplianceCredibilitySocial ImpactRisks
C. Annual disclosure by NPOs on SSE which have either raised funds through SSE or are registered with SSE in terms of Regulation 91C of the LODR Regulations
The following disclosures would be made by the NPOs on an Annual Basis (i.e.) within 60 days from end of Financial Year: Disclosure on General AspectsDisclosure on Governance AspectsDisclosure on Financial AspectsA guidance note in respect of the above aspects in provided at Annexure I of this circular.SSE may specify additional parameters that may be required to be disclosed by NPO on annual basis.
D. Disclosure of Annual Impact Report by all Social Enterprises which have registered or raised funds using SSE in terms of Regulation 91E of the LODR Regulations
All Social Enterprises will have to provide duly audited Annual Impact Report (AIR) to SSE within 90 days from the end of Financial Year. The AIR shall capture the qualitative and quantitative aspects of the social impact generated by the entity. In case an NPO is only registered without listing any security, the AIR must cover the NPO’s significant activities, intervention, programs or projects during the year and the methodology for determination of significance must be explained. For a Social Impact Fund where the underlying recipients of funds are SEs which have registered or raised funds using SSE, must disclose an overall AIR for the fund covering all investee/grantee organizations where the fund is deployed. The AIR should at a minimum, cover the aspects described below.Strategic Intent and PlanningApproachImpact Score Card A guidance note in respect of the above aspects is provided at Annexure II of this circular. SSE may specify additional parameters that may be required to be disclosed by SE in its AIR. The AIR shall be audited by Social Auditors and the SEs shall disclose the report of the Social Auditor along with AIR.
E. Statement of utilisation of funds in terms of 91F of the LODR Regulations
Listed NPO shall submit statement of utilisation of funds to SSE, as mandated under Regulation 91F of the LODR Regulations, within 45 days from the end of quarter. 2. This circular is issued in exercise of powers conferred by Section 11(1) of the Securities and Exchange Board of India Act, 1992, to protect the interests of investors in securities and to promote the development of, and to regulate the securities market and shall come into effect immediately. 3. A copy of this circular is available on SEBI website at sebi.gov.in under the categories “Legal Framework/Circulars”.
