Nov 09, 2022

Amendments to SEBI ICDR Regulations: Framework for Functioning of Social Stock Exchanges

The Securities and Exchange Board of India (‘SEBI’) has by way of the SEBI (Issue of Capital and Disclosure Requirements) (Third Amendment) Regulations, 2022 (‘Third Amendment Regulations’) inserted a separate Chapter X-A (‘Chapter X-A’) in the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018, which specifically deals with establishment, framework and functioning of social stock exchanges. The key provisions of Chapter X-A are summarised below:

Key ProvisionsParticulars
Ambit Establishment of social stock exchanges (‘SSEs’), being a separate segment of recognised stock exchanges having nationwide trading terminals permitted to register and/or list the securities issued by not for profit organisations (‘NPOs’).

Identification of social enterprise (‘Social Enterprise’), i.e. either an NPO or a for-profit social enterprise (‘FPSE’) that meets the eligibility criteria specified in Chapter X-A.

An NPO has been defined as a Social Enterprise which is any of the following entities: (i) a charitable trust registered under the Indian Trusts Act, 1882 or any other relevant State public trust statute; (ii) a charitable society registered under the Societies Registration Act, 1860; (iii) a company incorporated under Section 8 of the Companies Act, 2013; or (iv) any other entity specified by SEBI.

An FPSE has been defined as a company or a body corporate operating for profit, which is a Social Enterprise and does not include a company incorporated under Section 8 of the Companies Act, 2013.

Following entities will not be eligible to be identified as a Social Enterprise:

  • corporate foundations;
  • political or religious organizations or activities;
  • professional or trade associations; and
  • infrastructure and housing companies, except affordable housing.
Applicability and AccessibilityChapter X-A applies to:

  • an NPO seeking to only get registered with an SSE;
  • an NPO seeking to get registered and raise funds through an SSE; and
  • an FPSE seeking to be identified as a Social Enterprise.

SSEs will be accessible to:

  • institutional investors;
  • non-institutional investors; and
  • other class(es) of investors as permitted by SEBI.
EligibilityConditions for NPOs or FPSEs to be identified as Social Enterprise – establishing primacy of social intent, which is based on the following eligibility criteria:

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

  • eradicating hunger, poverty, malnutrition and inequality;
  • promoting health care including mental healthcare, sanitation and making available safe drinking water;
  • promoting education, employability and livelihoods;
  • promoting gender equality, empowerment of women and LGBTQIA+ communities;
  • ensuring environmental sustainability, addressing climate change including mitigation and adaptation, forest and wildlife conservation;
  • protection of national heritage, art and culture;
  • supporting incubators of Social Enterprises;
  • supporting other platforms that strengthen the non-profit ecosystem in fundraising and capacity building;
  • promoting livelihoods for rural and urban poor including enhancing income of small and marginal farmers and workers in the non-farm sector;
  • slum area development, affordable housing and other interventions to build sustainable and resilient cities;
  • disaster management, including relief, rehabilitation and reconstruction activities;
  • promotion of financial inclusion;
  • facilitating access to land and property assets for disadvantaged communities;
  • bridging the digital divide in internet and mobile phone access, addressing issues of misinformation and data protection;
  • promoting welfare of migrants and displaced persons; or
  • 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:

  • 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’);
  • at least 67% of the immediately preceding three-year average of expenditure has been incurred for providing eligible activities to the Target Population; and
  • 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.
Fund Raising








A Social Enterprise may raise funds through the following means:


  • issuance of zero coupon zero principal instruments (‘ZCZPs’) to institutional investors and/or non-institutional investors – such public issuance of ZCZPs will be deemed to be in compliance with Rule 19 of the Securities Contracts (Regulation) Rules, 1957;
  • donations through Mutual Fund schemes as specified by SEBI; and
  • any other means as specified by SEBI from time to time.


  • issuance of equity shares on the main board, small and medium enterprises platform or innovators growth platform;
  • issuance of equity shares to an alternative investment fund, including a social impact fund;
  • issuance of debt securities; and
  • any other means as specified by SEBI from time to time.
Termination of Listing of ZCZP from SSEUpon the occurrence of any of the following events:

  • the object for which funds were raised has been achieved and a certificate to this effect is submitted to the SSE; or
  • the tenure to achieve the object for which the funds were raised as provided in the fund raising document has expired.

Corresponding changes have been made to the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, and the Securities Contracts (Regulation) Act, 1956, to give effect to the amendments promulgated through the Third Amendment Regulations.

On September 19, 2022, SEBI issued a Circular to supplement the framework set up by way of the Third Amendment Regulations and set up a detailed framework for SSEs. This Circular provided (i) the minimum requirements to be met by NPOs desirous of getting registered with SSEs; and (ii) the minimum initial disclosure requirements to be made by NPOs for raising funds through issuance of ZCZPs.

Way Forward

The Third Amendment Regulations, read with the SEBI Circular dated September 19, 2022, have specified a primary framework for establishment and governance of SSEs. However, there are several areas where the SSE framework requires further clarity, including in relation to (i) timelines for setting up of an SSE and notification of rules, guidelines or bye-laws for its day to day functioning; (ii) procedure and mechanism of fund raising by NPOs; (iii) procedure and minimum information/ disclosure requirements for registration of NPOs with SSEs and identification of FPSEs as Social Enterprises; (iv) identification of key intermediaries who will facilitate registration and fund raising on an SSE; (v) detailed disclosure requirements to be made by NPOs in a fund raising document; and (vi) composition and terms of reference of a Social Stock Exchange Governing Council. Unless further clarity is received on the above, the framework for SSEs may be construed to be ambiguous and pose challenges.




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