Important Amendments to the Social Stock Exchange (SSE) Framework

In December 2023, SEBI issued notifications of amendments to the ICDR, LODR and amended its Circular of Sep 19, 2022 to enable greater participation of NPOs on the Social Stock Exchange.

We believe these amendments will make it possible for more NPOs to qualify for registration and improve prospects of listing (fundraising) on the SSE.

Highlights of the amendments are:

Minimum requirement to be met by a Not for Profit Organization (NPO) for registration with SSE

• Registration Certificate under section 12A/ 12AA/ 12AB/ 10(23C)/ 10(46) to be valid for at least the next 12 months.

• Details regarding pending notices or scrutiny cases from all regulatory and statutory authority shall be disclosed at the time of making the application for the registration.
  The Stock Exchanges shall have the right to refuse registration of those applicants, if the notices/ scrutiny cases are grave and debilitating enough to endanger the registration of the NPO under the Income-tax Act, 1961 or other relevant laws.

• Fines or penalties if imposed shall be disclosed as paid or appealed within 7 days.

• Entity to ensure disclosure whether tax deduction is available or not to investors.

• Details of past social impact to be disclosed as per the existing practice of NPOs.
  The past social impact should highlight trends in key metrics/ parameters relevant to the NPO (as may be determined by the Exchanges) for which it seeks to raise funds on SSE, number of beneficiary, cost per beneficiary and administrative overheads.

Conditions relating to issuance of Zero Coupon Zero Principal Instruments

• Lowering of the minimum issue size to Rs50 Lakh
• Lowering of the minimum subscription amount to Rs10,000
• The minimum subscription required to be achieved shall be 75% of the funds proposed to be raised through issuance of Zero Coupon Zero Principal Instruments.
• In case of any under subscription, the not for profit organisation shall, in the fund raising document, provide details on the following:
  a) manner of raising balance capital in case of such under subscription between 75% and 100%;
  b) possible impact on achieving the social objective(s) in case such under subscription is not arranged
  Provided that the funds shall be refunded in case the subscription is less than 75% of the issue size.

In the LODR

• In regulation 91E, in sub-regulation (2), the words “audited by a Social Audit Firm employing Social Auditor” shall be substituted with the words and symbols “assessed by a Social Impact Assessment Firm employing Social Impact Assessor(s)”.

In the ICDR

• Regulation 292A

1. a) in clause (f), the word “Auditor” appearing in the words and expression “Social Auditor” shall be substituted with the words “Impact Assessor”;
2. b) in clause (g),-
   1. the word “Audit” appearing in the words and expression “Social Audit Firm” shall be substituted with the words “Impact Assessment”;
   2. the words “Auditors” shall be substituted with the words “Impact Assessor(s)”.

• Regulation 292C modified: A Social Stock Exchange shall be accessible to institutional investors, non-institutional investors and retail investors.

For full details, read the attached circular of Dec 28, 2023 and notifications of amendment to LODR and ICDR.