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Note on listing of NPO on Social Stock Exchange

  • DEFINITION OF SOCIAL STOCK EXCHANGE –

It means a separate segment of a recognized stock exchange having nationwide trading terminals permitted to register Not-for-Profit Organizations and / or list the securities issued by Not-for-Profit Organizations in accordance with provisions of these regulations.

There is much potential for SSEs in India as there are 31 lakh NPOs more than the number of schools and 250 times the number of government hospitals. This means that there is one NPO for 400 Indians. That way the foundations for a robust welfare state can be aid.

  • MINIMUM REQUIREMENTS TO BE MET BY A NOT-FOR-PROFIT ORGANIZATION (NPO) FOR REGISTRATION WITH SSE IN TERMS OF REGULATION 292F OF THE ICDR

A NPO desirous of registration on SSE, in terms of Regulation 292F(1) of ICDR Regulations, shall fulfil the following criteria:

Broad Parameter Indicator Details
Legal 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

Ownership and control 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
  • ACCESS TO SOCIAL STOCK EXCHANGE

 

A Social Stock Exchange shall be accessible only to institutional investors and non-institutional investors: Provided that the Board may permit other class(es) of investors, as it deems fit, for the purpose of                  accessing Social Stock Exchange.

 

  • SOCIAL STOCK EXCHANGE GOVERNING COUNCIL –

 

  1. Every Social Stock Exchange shall constitute a Social Stock Exchange Governing Council to have an oversight on its functioning.
  2. The composition and terms of reference for such Governing Council shall be specified by the Board from time to time.

 

  • OTHER REQUIREMENTS RELATING TO REGISTRATION FOR A NOT-FOR-PROFIT ORGANIZATION –The Regulator Specified:-
  1. minimum requirements as specified in Point C to be met by a NPO for registration with SSE,
  2. disclosure requirement for NPOs raising funds through the issuance of zero-coupon zero principal instruments and
  3. Put in place annual disclosure requirements that needs to be made by NPOs on such exchanges.
  • Listed NPO will have to submit a statement of utilisation of funds to SSE, as mandated under SEBI’s rules within 45 days from the end of quarter.
  • SEBI has asked social enterprises raising funds using SSE to disclose Annual Impact Report (AIR) within 90 days from the end of financial year, capturing the qualitative and quantitative aspects of the social impact generated by the entity and where applicable, the impact that is generated by the project or solution for which funds have been raised on SSE.
  • Specifying initial disclosure requirement for NPOs raising funds through the issuance of zero coupon zero principal instruments, SEBI said such entities need to make disclosure about its vision, disclose target segment (those affected by the problem and how are they affected) and approach to accomplish its planned activities; details of its governing body, composition, dates of board meetings held; and details of key managerial staff.
  • In respect of annual disclosure by NPOs on SSE which have either raised funds through SSE or are registered with SSE, SEBI said that such NPOs will have to disclose about details of top five donors or investors in terms of budget, scale of operations, including employee and volunteer strength, governance structure, financial statement, programme-wise fund utilisation for the year and auditors report and auditor details.

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