Social Stock Exchange means a separate segment of a recognized stock exchange having nationwide trading terminals permitted to register especially Not for Profit Organizations (NPOs) and to list their securities in accordance with the provisions of the SEBI regulations.

The Social Stock Exchange (SSE) is a platform which shall allow social enterprises, be it Not For Profit Organization or For Profit Social Enterprise to raise funds. Additionally, not for profit organization may choose to merely register with SSE and not raise funds. The Non-Profit Organisations (NPOs) include trust, society, NGOs or Section 8 Company registered/incorporated under the Companies Act, 2013 and For Profit Social Enterprise (FPEs) includes corporates. The social intent must be the first and primary objective of all social enterprises that plan to list their securities on SSE.

Additionally, a Social Stock Exchange can be defined as a regulated platform that connects the charitable foundations and social organizations with donors to make it easier to support, diversify and grow the social enterprises. SSE shall establish a system and mechanism to regulate the functioning of social enterprises. The most important role that SSE shall play is to act as a facilitator of social financing and create a common platform for social enterprises, donors and investors.

What is Social Stock Exchange (SSE)?

Objective of SSE

The Objective of SSE is to act as a bridge between social and environment organisations and investors looking to support social impact on a platform that provides transparency. The goal of Social Stock Exchanges (SSEs) is to tap into a vast amount of social funding and promote partnerships between traditional investment and social funding. This way, regular financial resources can team up with social funds to address societal issues and challenges. Social sector organizations, whether for-profit or non-profit, play a crucial role in providing essential services to vulnerable and marginalized communities. However, their effectiveness depends on receiving proper funding. Currently, key sources of financing for India's social sector include Corporate Social Responsibility (CSR), impact investment, philanthropy, and regular giving. Bringing together these diverse funding channels onto a common platform and establishing consistent frameworks for reporting, measurement, and standards could significantly advance the sector. This is where the SSE comes in. The main goal of SSE is to promote transparency and accountability in how funds are raised and used across different financing channels.

Main Objectives:
- To offer a platform for NGOs/NPOs/FPEs to raise funds for their social activities and projects.
- To assist social investors in investing in organizations that have a positive social impact.

Functions of SSE

Listing Funding Channels: The SSE identifies and lists various funding channels that support the social sector.

Establishing Procedures and Guidelines: It provides a set of procedures and guidelines that serve as a filter, ensuring that only social organizations demonstrating measurable social intent are accepted and that they report on their social impact.

Standardization of Procedures: One of the primary functions of SSE is to standardize procedures within the sector, promoting consistency and reliability.

Setting Frameworks for Organizations: SSE also establishes frameworks of procedures, guidelines, and codes of conduct for organizations focused on social impact, ensuring accountability and ethical practices in their operations.

Process of Registration of SSE

To register on the Social Stock Exchange, the SSE will specify the conditions applicable to social enterprises at the time of submitting documents to SEBI (Securities and Exchange Board of India). The SSE will also instruct social enterprises to adhere to the rules and principles established by the Social Stock Exchange Governing Council (SGC). This process ensures that social enterprises meet the necessary requirements and guidelines set by the SSE for listing and operating within the exchange.

I. NPO must be registered as Trust/Society/Section 8 company.
II. NPO must be at least 3 years old.
III. Tax Exemption u/s 12AA/12A/12AB and 80G.
IV. Darpan registration is Mandatory.

Minimum Fund Flows

V. Annual spending in the past FY Rs. 50 Lakh or more.
VI. Funding in the past FY- Rs. 10 Lakh or More.

VII. Conditions for NPOs or FPSEs to be identified as Social Enterprise – establishing primacy of social intent, which is based on the following eligibility criteria: (in line with specified SDGs)

a. Indulge in at least one of the following activities:

1. Eradicating hunger, poverty, malnutrition and inequality;

2. Promoting health care including mental healthcare, sanitation and making available safe drinking water;

3. Promoting education, employability and livelihoods;

4. Promoting gender equality, empowerment of women and LGBTQIA+ communities;

5. Ensuring environmental sustainability, addressing climate change including mitigation and adaptation, forest and wildlife conservation;

6. Protection of national heritage, art and culture;

7. Training to promote rural sports, nationally recognised sports, Paralympic sports and Olympic sports;

8. Supporting incubators of Social Enterprises;

9. Supporting other platforms that strengthen the non-profit ecosystem in fundraising and capacity building;

10. Promoting livelihoods for rural and urban poor including enhancing income of small and marginal farmers and workers in the non-farm sector;

11. Slum area development, affordable housing and other interventions to build sustainable and resilient cities;

12. Disaster management, including relief, rehabilitation and reconstruction activities;

13. Promotion of financial inclusion;

14. Facilitating access to land and property assets for disadvantaged communities;

15. Bridging the digital divide in internet and mobile phone access, addressing issues of misinformation and data protection;

16. Promoting welfare of migrants and displaced persons; or

17. Any other area as identified by SEBI or the Government.

b. Target underserved or less privileged population segments or regions recording lower performance in the development priorities of Central or State Governments.

c. Have at least 67% of its activities, qualifying as eligible activities to the target population, to be established through one or more of the following:

o Expenditure: At least 67% of the immediately preceding three-year average of expenditure has been incurred for providing eligible activities to the Target Population;

o Customer Base: The Target Population constitutes at least 67% of the immediately preceding three-year average of the total customer base and/or total number of beneficiaries.

o Revenue: At least 67% of the immediately preceding three-year average of revenues comes from providing eligible activities to members of the target population (‘Target Population’);

This information on social stock exchange has been compiled by CA. Chandan Shahi, Social Auditor. For query related to social audit registrations, set-up, listing and advisory, you can connect with on contact@taxgyani.com or at +91-9625893100

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