Overview of Social Stock Exchange License
In India, Social Stock Exchange (SSE) is slowly evolving as a potential funding mechanism for a lot of non-profit organizations. Many NPOs (Non-Profit Organizations) in India face trust deficits which prevent them from doing many social activities. Social Stock Exchange was mainly introduced to reduce his issue so that Non-Profit Organizations face fewer challenges to operate. Social Stock Exchange (SSE) is formed with the intent to give social enterprises an extra avenue to raise money and this concept was introduced with the main purpose of serving the private & non-profit sectors by routing greater capital to them. On September 19, 2022, SEBI had already proposed a new framework for the SSE and this new framework would allow the listing of non-profit organizations (NPOs).
Social Stock Exchange (SSE) was 1st proposed by Finance Minister of India Nirmala Sitharaman as a part of the Union Budget speech for FY 2019-2020 and this was started with an aim to list social enterprises & voluntary organizations. Social Stock Exchange (SSE) is formed with an intent to give social enterprises an additional avenue to raise money and this concept was established with the sole purpose of serving the private & non-profit sectors by routing big capital to them. The information that is mandated for Social Stock Exchange (SSE) to collect is the Non-Profit Organization’s strategy, vision, details of key management personnel, financial statements for the last 3 years & the risks that the Non-Profit Organization sees to its work. We are here to assist you to explore the fundamental components of the Social Stock Exchange (SSE) in India, comprising of its goals, advantages & ability to promote beneficial transformation & we can also help you in obtaining your Social Stock Exchange License.
Objectives of Social Stock Exchange
Getting a Social Stock Exchange License in India is important for the growth of social enterprises. Apart from this, it boosts the funding opportunities for Non-Profit Organizations. The following are the main objectives of Social Stock Exchange in India:
- Boost CSR: The Social Stock Exchange License supports the Government importance of CSR (Corporate Social Responsibility) efforts by helping companies allocate their CSR funds in a more targeted manner. It promotes businesses to follow rules & participate in social progress.
- Social Impact Empowerment: The primary objective of Social Stock Exchange is to increase social impact empowerment, focusing on main societal issues like healthcare, education, environment sustainability, and gender equality. Through investing in these organisations, the Social Stock Exchange provides the advancement of their projects & promotes for beneficial transformation.
- Maximise Funding Potential: Any SSE that gives a path for social enterprises & non-profits to secure & maximise funding potential from a huge pool of investors allows these organisations to expand their operations, introduce new solutions & achieve longer-term growth.
- Sustainable Development Goals: Social Stock Exchange supports the UN Sustainable Development Goals by directing funding towards projects that will help to get these global targets & by prioritizing investments that have positive impacts on society & the environment, the Social Stock Exchange is fundamental in promoting such developments.
Benefits of Social Stock Exchange License in India
Registering Social Stock Exchange provides the following benefits for social enterprises:
- Increased Credibility: Being listed on a regulated exchange adds a layer of credibility & trust, making it increasingly in social impact.
- Various Funding Opportunities: By listing on the Social Stock Exchange, social enterprises can reach out to an extensive investor base, which includes institutions & individuals interested in social impact.
- Accountability & Transparency: As the listing process needs documentation & audits, it completely ensures that the listed Stock Exchange maintains high standards of transparency & accountability.
- Innovating for Impact: The Social Stock Exchange encourages an environment in which social enterprises are motivated to create new & inventive answers to urgent social problems with the help of innovation in the social impact. It could result in groundbreaking progress in different industries.
- Investment Portfolio: Social Stock Exchange provides investors with an opportunity to access the portfolio for investment purposes & to distribute their investment portfolios by adding socially impactful ventures. Diversifying helps reduce risk & makes an investment portfolio more resilient.
Eligibility Criteria for Social Stock Exchange License
The following are the eligibility criteria for Obtaining a Social Stock Exchange License:
1. The entity must be registered as Non-Profit Organisation with the Registration Certificate valid for the period of the next 12 months during the Registration with the Social Stock Exchange for these entities mentioned
- Charitable Trusts are registered under the Societies Registration Act, 1860 and Indian Trust Act, 1882;
- Charitable Trusts that are registered under the Public Trust Statute of the relevant state;
- Any company registered under Section 8 of the Companies Act, 2013;
- The validity period of the NPO after getting the Registration Certificate is for atleast 3 years;
- Income Tax Act, 1960 provides for the deduction under Section 80G for the entity to ensure that if the tax deduction is available to the investors;
- To be exempted under Income Tax Act for getting the Certificate under Section 12 or 12AA or 12AB given under the same act that is valid for next 12 months & not giving notice or any ongoing scrutiny by the Income Tax;
- To be eligible as a social enterprise, it is required to follow the regulations under Sectio-292E of the ICDR Regulation as specified under SSE;
- In case the Non-Profit Organisation is owned or even controlled by the Government or a Private Institution, the ownership & control of the governing papers like AoA & MoA or a Trust Deed or bylaws must be disclosed.
2. Minimum Fund Flows: Yearly spend for the last financial years for the receipts or the payments from audited accounts or fund flows management for the minimum amount of Rs. 50 lakhs;
3. Funding is to be held in the last financial year for the receipts generated from the audited accounts of any fund flow management for at least Rs. 10 lakhs.
Documents Required for Social Stock Exchange License
Once you have confirmed the eligibility, then the next step is to prepare all the important documents. The following are the documents required for Social Stock Exchange License:
1. Application Form;
2. Registration Certificate: Your Non-Profit Organization must be registered under one of the following:
- Charitable Trust registered under the public trust statute of the relevant state;
- Charitable trust registered under the Indian Trusts Act, 1882;
- Charitable trust registered under the Societies Registration Act,1860;
- Company registered under Section 8 of the Companies Act, 2013.
Important Point: The Registration Certificate must be valid for at least next 12 months from the application date and the Non-Profit Organization must have been registered for at least 3 years before the application date.
3. You need to prepare some governing documents of the Non-Profit Organization under Section 12A/12AA/12AB of the Income Tax Act and this certificate should be valid for at least the next months.
4, A valid 80G Registration is also required.
5. You have to submit the last 3 financial years’ audited financial statements along with a fund flow statement. For Section 8 Companies, Annual Reports for the last 3 years are also required.
6. You need to provide a resolution from the governing body of the Non-Profit Organization for the Social Stock Exchange License.
7. Confirmation from the NPO and the Social Auditor/Statutory Auditor.
8. Depending on the Organization’s type, submit the following:
For Section 8 Companies:
- Name and PAN of the promoters & its groups;
- Name & PAN of Directors;
- Name and PAN of companies/social enterprises where promoters/directors are involved.
For other Organizations:
- Name & PAN of Trustees or governing body members;
- Names & PAN of companies/social enterprises where trustees/governing body members are involved.
9. Complete the Registration agreement as per Annexure-IV.
Process for Social Stock Exchange License
To get a Social Stock Exchange License in India, an NPO needs to understand the eligibility criteria first, collect all the vital documents and then submit the Registration Application to the SSE which will evaluate the application & approve listing if the Non-Profit Organization meets the required social impact criteria & financial standards, this process involves appointing a social audtor, preparing a detailed fundraising document & demonstrating a significant portion of activities dedicated to social good via revenue or expenditure metrics.
The following are the key steps in the Social Stock Exchange License Process:
- First, you need to ensure that you are fulfilling the eligibility criteria or not.
- Then you need to prepare all the documents required for the registration.
- Once you completed the above step then you need to complete the application form on the designated Stock Exchange Platform (NSE or BSE).
- Then SSE will review the application and documents.
- Upon successful evaluation then the SSE will grant approval for listing on the exchange.
Why Whizseed?
At Whizseed, we help NPOs looking to register with the Social Stock Exchange & get a Social Stock Exchange License.
- Eligibility Assessment: Our team of SSE consultants will check the eligibility of your organization for the SSE based on SEBI regulations.
- Compliance Support: We will help you end-to-end compliance support, from the application process to registration completion.
- Documentation: Our experts will help you in preparing & reviewing all the documents to channel the registration work effortlessly.
- Financial Reporting: You might be looking for someone who can manage the financial reporting part of the Social Stock Exchange Registration. Your financial reports need end with our expert guidance & end-to-end service.
- Post-listing support: We are here to help you beyond the listing on SSE & the acquisition of a social stock exchange license.
- Social Audit: Our expert team will conduct a social audit of your venture & recommend the correct way to help you grow your business in the future.
