Initial Phase Social Stock Exchange cum Social Auditor- Framework So Far

Initial Phase Social Stock Exchange – Framework So Far.

Introduction

India’s drive to meet agenda for Sustainability Development by 2030, SEBI notifies various framework for the Social Stock Exchange(SSE), which will provide Social Enterprises(SE) with an additional avenue to raise funds from not just Grant-in-Aid from Governments but also from Public and Private Sectors.

In tandem, SEBI vide its notification dated 25th July, 2022 made amendments in SEBI (ICDR) Regulations, 2018, and SEBI (LODR) Regulations, 2015. These amendments will immediately come into effect, which are as follows;

SECURITIES AND EXCHANGE BOARD OF INDIA (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) (THIRD AMENDMENT) REGULATIONS, 2022

What is Social Stock Exchange (SSE)? – 292A(i)

SSE means a

:-  SEPARATE SEGMENT of a Recognized Stock Exchange (RSE) having nationwide trading terminals

:-  permitted to register NPOs OR Listed Securities issued by NPOs Note

:- it will be a SEPARATE SEGMENT on already existing RSE (BSE/NSE). :- it is noted that there are two types of NPOs covered here:

1. a NPO seeking to only get registered with a Social Stock Exchange;

2. a NPO seeking to get registered and raise funds through a Social Stock

:- SSE allows registration of even NPOs, without any securities being listed.

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Exception: Corporate foundations, political or religious organizations or activities, professional or trade associations, infrastructure and housing companies, except affordable housing, shall not be eligible to be identified as a Social Enterprise

Note: To be eligible as a Social Enterprise, the NPO [292A(e)] or FPSE [292A(c)] should fulfils above criteria specified under 292E

Note: from above explanation, it is to be clarified that:

1. NPO can opt for registration without issuing the securities.

2. Registration is optional but Mandatory only when funds are going to be raised.

3. The minimum requirements for registration of a NPO on a SSE is yet to be specified by the Board and SSE both.

Note:

• Securities can be traded and listed by FPSE under applicable segments only if it meets both the criteria of this chapter and the criteria of applicable segments.
• Applicable segments mean main board, SME Platform or innovators growth platform, as applicable.
• There will be an IDENTIFIER stating that the script is of FPSE and it meet all the criteria of applicable segments.

Note:

• ZCZP shall be issued only in Dematerialized form
• Minimum issue size: 1 Crore Rupees
• Minimum application size: 2 Lakhs Rupees
• Minimum Subscription requires: 75% of the issue size:
• In case of undersubscription,
  • • If undersubscription is between 75 to 100%:
      • Provide details of manner of raising balance capital and;
      • Possible impact on achieving the social objectives if such undersubscription funds could not be arranged.
    • If undersubscription is less than 75%:
      • Funds shall be refunded.

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INELIGIBILITY FOR RAISING OF FUNDS

A Social Enterprise shall not be eligible to register or raise funds through a Social Stock Exchange or

Stock Exchange, as the case may be:

• if the Social Enterprise or any of its promoters or directors or trustees;
  • are debarred from accessing the securities market by the Board
  • is a wilful defaulter or a fraudulent borrower
  • is a fugitive economic offender
  • has been debarred from carrying out its activities or raising funds by the Ministry of Home Affairs or any other ministry of the Central Government or State Government or Charitable Commissioner or any other statutory body
  • if any of the promoters or directors or trustees of the Social Enterprise is a promoter or director of any other company or Social Enterprise which has been debarred from accessing the securities market by the Board