New Framework for Social Stock Exchange

September 21, 2022

The SEBI has unveiled a framework for the SSE, which was notified in July 2022.

Key facts

Under the new rules, the Social Stock Exchange (SSE) will be a separate segment from existing stock exchanges.
Social enterprises eligible to participate in the SSE must be not-for-profit organizations and for-profit social enterprises having social intent and impact as their primary goal.
These enterprises must focus on eligible social objectives for the development and welfare of undeserved and less privileged populations or regions.
The new framework specifies the minimum requirements of the not-for-profit organizations (NPOs) for registering with the bourse as well as the disclosure requirements.
The NPOs must disclose funds raised through the issuance of zero-coupon zero-principal instruments.
The Listed NPOs are mandated to submit a statement of utilization of funds to the SSE within 45 days from the end of quarter.
Social enterprises raising funds using SSEs are also required to provide Annual Impact Report within 90 days from the end of financial year.
This report must highlight the qualitative and quantitative aspects of the social impact created by the NPOs. If possible, it must also capture the impact generated by the project or solutions for which funds were raised on SSE.

What is SSE?

The idea of social stock exchange (SSE) was first introduced by Finance Minister Nirmala Sitharaman during the 2019-20 budget speech. It is the public listing of Not for Profit Organization (NPO) on stock exchanges. The NPOs are establishments involved in the welfare of society or community. They are set up as charitable organizations. The SSE aims to provide them with alternative fund-raising instrument. The investors can claim tax benefits for making contributions via the SSE. Similar mechanism is available in countries like the United Kingdom, Canada and Brazil.

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