Social Stock Exchange in India

In an era where global challenges like climate change, inequality, and poverty demand innovative solutions, traditional financial markets too need to accommodate a new wave of socially conscious investors. Therefore, the idea of an electronic fund-raising platform “Social Stock Exchange in India” was proposed under the regulatory ambit of SEBI. The concept of a (SSE) Social Stock Exchange in India has emerged as a ground breaking development, for listing social enterprises and voluntary organizations working for the realization of a social welfare objective so that they can raise capital as equity, debt or as units like a mutual fund. This article explores the essence of Social Stock Exchange in India.

TABLE OF CONTENT

What is Social Stock Exchange on BSE and NSE?

The Social Stock Exchange segment on both BSE and NSE aims to provide an opportunity to Non- profit organization and For-profit organizations to register themselves and raise funds on a recognized exchange platform. Unlike traditional stock exchanges that primarily focus on financial returns, SSEs prioritize organizations dedicated to making a positive contribution to society. These exchanges provide a marketplace where investors can support and fund enterprises that align with their values and ethical principles.

Objective of Social Stock Exchange Trading

• Regulated platform that brings together social enterprises and donors
• Facilitate funding and growth of social enterprises
• Enabling mechanism to ensure robust standards of social impact and financial reporting

What is a Not-for-profit organization in the context of Social Stock Exchange?

A not for profit organization is an entity which meets the criteria to be identified as a social enterprise and is any of the following entities:

• A charitable trust registered under the public trust statute of the relevant state;
• A charitable society registered under the Societies Registration Act, 1860;
• A company incorporated under section 8 of the Companies Act, 2013;
• Any other entity as may be specified by SEBI

What is a for profit social enterprise in the context of Social Stock Exchange?

A for profit social enterprise is an entity which meets the criteria to be identified as a social enterprise and is any of the following entities:

• A company under the Companies Act, 2013, operating for profit and does not include a company incorporated under section 8 of the Companies Act, 2013;
• A body corporate operating for profit

Eligibility conditions for trading in Social Stock Exchange Market

The Social Enterprise should fulfill any one of the below conditions to become eligible for trading

• Revenue of Social Enterprise at least 67% of the immediately preceding 3-year average of revenues comes from providing eligible activities to members of the target population
• Beneficiaries of Social Enterprise Expenditure of Social Enterprise at least 67%of the immediately preceding 3-year average of expenditures has been incurred for providing eligible activities to members of the target population Members of the target population to whom the eligible activities have been provided constitute at least 67% of the immediately preceding 3-year average of the total customer base/ beneficiaries

Target Segment

Social Enterprise shall target underserved or less privileged population segments or regions recording lower performance in the development priorities of central or state governments.

1.Activities that demonstrates the social impact on social stock

• No poverty
• Zero hunger
• Good health and well being
• Quality Education
• Gender Equality
• Clean water and sanitation
• Affordable and clean energy
• Decent work and economic growth
• Industry, Innovation and Infrastructure
• Reduced inequalities
• Sustainable cities and communities
• Responsible consumption and production
• Climate Action
• Sustainable development goals

Therefore, the organization should be engaged in one of the above activities to become eligible for trading in social stock exchange market.

Registration in Social Stock Exchange

• Therefore, as shown in the image Non-Profit Organizations do require registration but it is minimal annual reporting requirements whereas no registration is required for Profit Enterprises.
• Non- Profit Organizations require listing of instruments as Equity or Zero coupon Zero Principal or Mutual Fund or as Specialised Investment Funds whereas for Profit Enterprises listing of securities is made as equity or debt or Specialised Investment Fund.

Which Social Enterprises are not eligible to get registered or raise funds through Social Stock Exchange/Stock Exchange?

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

• any of its promoters, promoter group or directors or selling shareholders (in case of for profit social enterprise) or trustees are debarred from accessing the securities market by SEBI.
• 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 SEBI;
• if the Social Enterprise or any of its promoters or directors or trustees is a wilful defaulter or a fraudulent borrower;
• If any of its promoters or directors or trustees is a fugitive economic offender
• if the Social Enterprise or any of its promoters or directors or trustees 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.

Conclusion

Social Stock Exchange represents a paradigm shift in the world of finance, introducing a new era where profit and purpose coexist. As the movement gains momentum, Social Stock Exchange could play a pivotal role in building a more sustainable and inclusive global economy, where financial success is measured not only in monetary terms but also in positive contributions to society. In order to stay updated with more legal updated a team of expert advisors from Legal Window is here to assist you at every step. Feel free to reach us at [email protected].