Introduction: A Glimpse into Social Enterprises under SEBI ICDR Regulations
Under the aegis of the Securities and Exchange Board of India (SEBI) and its Issue of Capital and Disclosure Requirements (ICDR) Regulations, a unique form of organisation has found legitimacy – the social enterprise. These enterprises can be either Not-for-Profit Organisations (NPOs) or For-Profit Social Enterprises (FPSEs) and are characterised by their fulfilment of specific eligibility criteria.
Fundamentally, social enterprises represent a marriage between a nonprofit’s social mission and commercial viability, ensuring financial sustainability. Their sources of funds aren’t limited to grants and donations; they also attract social venture capital funds.
Moreover, the legal mandate on Corporate Social Responsibility (CSR) spending compels companies to allocate 2% of their net profit towards initiatives such as these. Consequently, a considerable number of non-profit social enterprises have been beneficiaries of this funding support. Presently, various multilateral agencies such as companies, impact investors, incubators, accelerators, academic institutions, and research agencies assist social enterprises through funding, advisory support, research studies, and capacity-building workshops.
Social enterprises distinguish themselves through some fundamental features:
1. A primary focus on a social or environmental cause.
2. A revenue-generating model which procures profits via the sale of products or services.
3. The commitment to reinvest generated revenue into the social cause.
4. An operational structure that mirrors traditional companies, including enterprise orientations.
To earn recognition as a social enterprise under SEBI ICDR Regulations, a NPO or FPSE needs to demonstrate a predominant social intent. This intention can be established by meeting specific eligibility criteria, including involvement in one or more of the following activities:
Furthermore, a social enterprise must target underserved or less privileged populations or regions showing underperformance in the development priorities of central or state governments.
Social enterprises are becoming increasingly significant in our society, combining the power of a market-driven business with the humanistic goals of a non-profit. They provide innovative solutions to persistent social problems. The SEBI ICDR regulations play a crucial role in setting a standard for these organisations, helping ensure their commitment to social causes while maintaining financial sustainability. As such, a thorough understanding of these regulations is essential for any social enterprise aiming to make a significant impact.