Jan 23, 2024SEBI Circular on Framework of Social Stock Exchanges and SEBI (Issue of Capital and Disclosure Requirements) (Third Amendment) Regulations, 2023
SEBI, by way of its Circular dated December 28, 2023, read with the SEBI (Issue of Capital and Disclosure Requirements) (Third Amendment) Regulations, 2023, has amended the framework for Social Stock Exchanges (‘SSE’) allowing wider participation from not-for-profit organisations (‘NPOs’) to facilitate ease of investment in such NPOs. A summary of the changes contemplated are set forth below:
i. Entities registered under Sections 10(23C) and 10(46) of the Income Tax Act, 1961 (e., educational institutions and board/authority/trust/commission constituted by Central / State Government for regulating or administrating any activity for the benefit of the general public) are permitted to register with SSE so long as:
(a) their registration certificates are valid for 12 months from the date of registration;
(b) all pending notices or ongoing scrutiny from regulatory and statutory authorities are disclosed at the time of registration with the SSE; and
(c) fines / penalties are paid or appealed within seven days from the date of imposition of such fine / penalty.
ii. Formats and details of the past social impact can be provided by NPOs, based on past practice, instead of formats prescribed by SEBI. However, the social impact reports should highlight trends in key metrics relevant to the NPO for which it seeks to raise funds on SSE, number of beneficiaries, cost per beneficiary and administrative overheads.
iii. The procedure for public issuance of zero coupon zero principle instruments by NPOs has also been introduced, as per which, NPOs will be required to file a draft fund-raising document, with the disclosures mandated by SEBI, with the SSE with which it is registered, which will be available on the websites of the NPO and SSE for public comments for at least 21 days. The SSE will also be required to provide its observations on the draft fund-raising document within 30 days of such filing.
The amendments to the framework also contemplate a reduction in the minimum issue size from ₹1 crore (approx. US$ 120,000) to ₹ 50 lakhs (approx. US$ 6,000), and a reduction in the minimum application size from ₹ 2 lakhs (approx. US$ 2,500) to ₹ 10,000 (approx. US$ 120). Further, the minimum subscription has been set to 75% of the issue size.