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.

Exploring the Unique Traits of Social Enterprises

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.

Unpacking the Key Features of Social Enterprises

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.

Eligibility Criteria for Social Enterprises Under SEBI ICDR Regulations

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:

  • Eradicating hunger, poverty, malnutrition, and inequality.
  • Promoting healthcare, including mental healthcare, sanitation, and safe drinking water.
  • Education, employability, and livelihood advancement.
  • Gender equality and the empowerment of women and LGBTQIA+ communities.
  • Environmental sustainability, climate change mitigation and adaptation, and conservation of forests and wildlife.
  • Protection and promotion of national heritage, art, and culture.
  • Training and support for rural and nationally recognised sports, Paralympic and Olympic sports.
  • Support for social enterprise incubators and platforms that enhance the non-profit fundraising ecosystem and capacity building.
  • Livelihood promotion for rural and urban poor, income enhancement for small farmers and non-farm sector workers.
  • Slum development, affordable housing, and interventions for sustainable and resilient cities.
  • Disaster management encompassing relief, rehabilitation, and reconstruction activities.
  • Financial inclusion promotion.
  • Facilitation of land and property asset access for disadvantaged communities.
  • Addressing the digital divide, misinformation issues, and data protection.
  • Welfare of migrants and displaced persons.
  • Any other area identified by the Board or Government of India.

Furthermore, a social enterprise must target underserved or less privileged populations or regions showing underperformance in the development priorities of central or state governments.

Conclusion: Deciphering the Relevance of Social Enterprises

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.

Author Bio

Qualification: CA in Practice
Company: Rakesh Rajesh and Co.
Location: GHAZIABAD, Uttar Pradesh, India
Member Since: 29 Jul 2021 | Total Posts: 1
I am CA Charu Gupta, practicing in Ghaziabad. I have rich experience of 7 years in the field of Direct Taxation, Indirect Taxation, TDS, Statutory Audit, Bank Audit, Tax Audit, Internal Audit, etc. Apart from being FCA, I am a Peer Reviewer and IS Auditor View Full Profile

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One Comment

  1. CA. Rajesh Goyal says:

    Very informative Article. This shows self analysis of social scenarios and role of SE in social development. Really good article. Regards CA. Rajesh Goyal.πŸ™πŸ™πŸ‘πŸ‘

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