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Registration on Social Stock Exchange

Registration on Social Stock Exchange

Registration on Social Stock Exchange

What is a Social Stock Exchange (SSE):

Social Stock Exchange (SSE) is a separate segment of the existing Stock Exchanges in India that can help Social Enterprise(s) to raise funds from public through the stock exchange mechanism. It is designed to bridge the funding gap for Social Enterprises including Not For Profit (NFPs) and For-Profit (FP) Social Enterprises. It aims to connect these organizations with a wider investor base, including the general public, fostering a culture of social responsibility and impact investing.

In India, this is a relatively new concept which was introduced in the Budget of 2019. Further, SEBI vide Notification dated July 25, 2022 paved the way for setting up a Social Stock Exchange for both Not for profit and For profit social enterprises. This has resulted in creation of a separate segment on the two most prominent Stock Exchanges of India viz. NSE (National Stock Exchange of India Ltd.) and BSE (BSE Ltd.) catering only to Social Enterprises.

Who can get registered/listed on social stock exchange?

Any social enterprise (Non-Profit Organisation and For-profit enterprises) that establishes its primacy of social intent can get registered/listed on social stock exchange. Types of Social Enterprises

As already mentioned, Social Stock Exchange identifies the following two forms of social enterprises that are engaging in the activity of creating positive social impact and that meets primacy of their social intent.

  • Not-for-profit organization
  • For profit social enterprise

“Not for Profit Organisation” means a Social Enterprise which is any of the following entities:

  • A charitable trust registered under the Indian Trusts Act, 1882 (2 of 1882)
  • A charitable trust registered under the public trust statute of the relevant state
  • A charitable society registered under the Societies Registration Act, 1860 (21 of 1860)
  • A company incorporated under section 8 of the Companies Act, 2013 (18 of 2013)
  • Any other entity as may be specified by the Board;

“For Profit Social Enterprise” means a company or a body corporate operating for profit, which is a Social Enterprise for the purposes of these regulations and does not include a company incorporated under section 8 of the Companies Act, 2013.

Eligibility criteria of Social Enterprises:

In order to establish primacy of social intent, or recognition as a social enterprise, a Social Enterprise intending to register on Stock Exchanges, shall demonstrate that 67% of its activities qualifying as eligible activities to the target population shall be demonstrated by either of the following:

  • At least 67% of its revenue of the immediately preceding 3-year average of revenues comes from providing eligible activities to members of the target population.
    or
  • At least 67% of the immediately preceding 3-year average of expenditure has been incurred for providing eligible activities to members of the target population.
    or
  • 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 and/or total number of beneficiaries.

However, 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.

Criteria of Eligibility to Register on Social Stock Exchange in India for NPO:

Entity is legally registered as a NPO Registration Certificate valid for next 12 months Entities must be registered in India in one of the below:

  • A charitable trust registered under the public trust statute of the relevant state
  • A charitable trust registered under the Societies Registration Act, 1860
  • A charitable trust registered under the Indian Trusts Act, 1882
  • A company incorporated under section 8 of the Companies Act, 2013
Ownership & Control Governing Documents i.e MOA & AOA, Trust Deed, etc Disclose if it is owned/controlled by govt or private
Tax exempt under Income Tax Act Valid Certificate for at least next 12 months and no ongoing scrutiny under Income Tax Registration certificate under sections 12A, 12AA, or 12AB
Registration with Income Tax as NPO IT PAN IT PAN
Age of NPO Minimum 3 years to deliver social impact Registration Certificate
Tax Deduction under IT Valid 80G Registration Ensure registration is available or not to investors
Eligible to Social Enterprise Darpan Number and CSR Number Requirements with Regulation 292E of ICDR Regulations and registered on Darpan portal
Annual spending in the last financial year Receipts or Payments from Audited accounts/ Fund Flow Statement Minimum of Rs 50 Lac Annually
Funding in the past financial year Receipts from Audited accounts/ Fund Flow Statement Minimum fund of Rs 10 lac in the previous year

Registration Process of SSE

It is not mandatory for Not-for-Profit Organizations which are registered with Social Stock Exchange to seek listing, however it shall mandatorily seek registration with a Social Stock Exchange before it raises funds through a Social Stock Exchange.

A Not-for-Profit Organization may choose to register on a Social Stock Exchange and not raise funds through it. It can also continue to raise funds through any other means.

Registration process of SSE on BSE

NPOs seeking registration on the BSE SSE must submit a formal application on their official letterhead to the BSE SSE. This application shall be accompanied by the required documents listed below.

  1. Certificate of Constitution of NPO
  2. MOA, AOA, Trust Deed, Bye laws of or any other Governing document
  3. Copy of PAN, TAN, GST
  4. ITR of last 3 years
  5. Audited Financial Statements including Auditors Report for last 3 Financial Years.
  6. 80G registration under Income Tax Act
  7. Registration Certificate under the Income Tax Act, 1961 under section 12AB (along with previous registrations under 12A/12AA, if applicable) and/or 10 (23C).
  8. Annexure I to be given on the letter head of the entity contains the confirmation by the entity that the entity is formed and registered under Acts such as Indian Trusts Act, 1882, Societies Registration Act etc.
  9. Annexure II is the certificate of Chartered Accountant stating annual spending, past FY funding, filled Annual Returns within Due Dates, and other information as required of the NPO.
  10. Annexure III is the Confirmation of eligibility criteria for being identified as Social Enterprise.
  11. Annexure IV is the document that contains the vision statement, Mission Statement, Address, NGO Darpan Registration* details, its governing Board, Number of Staff, Details of Statutory Auditor, representative letter, Key projects handled, Social Audit Reports/ Impact Assessment Reports for projects (if any)
  12. Details of Fee

Registration process of SSE on NSE

NPOs seeking registration on NSE SSE must submit a formal application on their official letterhead to the NSE SSE. This application should be accompanied by the required documents listed below.

  1. Application as per Annexure I contains the information of NPO like Name, Address and other information. (PDF of annexures to be attached with this)
  2. Certificate of Constitution under the relevant Act such as public trust statue of the relevant state, Societies Registration Act, 1860, Indian Trusts Act, 1882, Companies Act, 2013
  3. NPO must have been registered at least 3 years prior to the date of application
  4. MOA, AOA, Trust Deed, Bye laws of or any other Governing document
  5. Registration Certificate under section 12A/12AA/12AB under Income Tax Act, 1961. Please note that the registration certificate should be valid for at least next 12 months from date of application
  6. 80G registration under Income Tax Act
  7. Last three financial years’ Audited financial statements of the NPO along with Fund Flow statement.
  8. Annual Reports for last 3 financial years as well, in case the Entity is a Section 8 Company.
  9. Resolution for registration on Social Stock Exchange along with the Annexures given by the NSE for the registration.
  10. Annexure I is the format of application in which the NPO can apply for its registration along with the fee.
  11. Annexure II is the undertaking from the NPO on their letterhead Stating about the eligibility of the NPO to be identified as Social Enterprise and information about its Promoters.
  12. Annexure III is the undertaking from the Social Auditor or Statutory Auditor stating compliances of Regulation 292E of SEBI (ICDR) Regulations, 2018, Information regarding the Annual Spending and about the funding of past FY of the entity.

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