SEBI introduce FIFTH AMENDMENT Regulations for Social Stock Exchange – 25th July 2022

SEBI vide its notification dated 25^th July, 2022 made amendments in SEBI (LODR) Regulations, 2015. These amendments will immediately come into effect and may be called  the  Securities  and  Exchange  Board  of  India  (Listing  Obligations and Disclosure Requirements) (Fifth Amendment) Regulations, 2022.

These amendments provides the framework for Social stock exchange which majorly provides eligibility of organizations to raise funds and the eligibility of entities to be classified as “Not for Profit Organization”, and the eligibility of entities to be classified as “For Profit Social Enterprise”, Means through which Social enterprise can raise funds.

Eligibility of Organizations for raising funds through Social Stock Exchange (SSE)

1. A For Profit Social Enterprise whose designated securities are listed on the applicable segment of the Stock Exchange.
2. A Not for Profit Organization that is registered on the Social Stock Exchange.

A For Profit Social Enterprise are defined as a company or body corporate operating for profit but having “social intent” and impact as their primary goal and the Social Enterprise shall be indulged 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;
17. Any other area as identified by the Board or Government of India from time to time

A Not for Profit Organization means a Social enterprise which is any of the following entities:

1. a charitable trust registered under the Indian Trusts Act, 1882;
2. a charitable trust registered under the public trust statute of the relevant state;
3. a charitable society registered under the Societies Registration Act, 1860;
4. a company incorporated under section 8 of the Companies Act, 2013;
5. any other entity as may be specified by the Board

Disclosure requirement under Chapter IX-A of SEBI LODR Regulations

For Profit Social Enterprise: A For-Profit Social Enterprise whose designated securities are listed on the SSE shall comply with the disclosure requirements contained in these regulations with respect to issuers whose specified securities are listed.

For Not for Profit Organization: A NPO registered on SSE shall be required to make annual disclosures to the SSE on specified matters within 60 days from the end of the financial year or as subsequently specified by SEBI.

Intimation and disclosure of events or information to the SSE are:

1. The Social Enterprise shall frame a policy for determination of materiality and duly approved by its board or management, which shall be disclosed on the SSE.
2. The board and management of the Social Enterprise shall authorize one or more of its Key Managerial Personnel for the purpose of determining materiality of an event or information and for the purpose of making disclosures to the SSE and the contact details of such personnel shall also be disclosed to the SSE.
3. A Social Enterprise shall disclose the event, comprising details of the event including the potential impact and the steps being taken by the Social enterprise to address the same to the SSE within 7 days of any event that may have a material impact on the planned achievement of outputs or outcomes. Further, relevant updates shall be provided to the SSE on a regular basis with relevant explanations till the time concern events remains material.
4. The Social Enterprise shall provide specific and adequate reply to all queries raised by the SSE, with respect to any events or information.

The Social Enterprise shall also disclose on its official website all such events or information which have been disclosed to the SSE under this regulation and may suo – moto confirm or deny any reported event or information to SSE.

Disclosure with respect to Social Impact are:

1. A Social Enterprise, shall be required to submit an annual impact report to the SSE in the format specified from time to time and that report audited by a Social Audit Firm employing Social Auditor.
2. The SSE may specify parameters, in addition to those specified by the SEBI, which shall also be required to be disclosed on an annual report.

Disclosure with respect to Statement of Utilization of Funds:

1. A listed NPO shall submit to the SSE, category-wise amount of money raised, utilised & balance unutilised on a quarterly basis and till the issue proceeds have been fully utilised or the purpose has been achieved.
2. The unutilised amount shall be kept in a separate bank account and shall not be co-mingled with other funds.

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