Social Stock Exchange License

Raising funds can be challenging for social enterprises. With our expert assistance, get a social stock exchange license and start raising funds for your NPO.

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What is the Need to Get a Social Stock Exchange License?

In India, it has become necessary to obtain a social stock exchange license for the NPOs. The exposure of a new financial frontier can be seen in the form of the Social Stock Exchange (SSE). This innovative idea combines the conventional financial markets with a strong emphasis on societal and environmental influence.

The goal of SSE is to transform the investment process by making it easier to fund organizations and projects that tackle important social problems. We are here to help you explore the fundamental components of the Social Stock Exchange in India, including its goals, advantages, and ability to promote beneficial transformations. We also help you obtain your Social Stock Exchange license.

Social Stock Exchange (SSE) Ecosystem: An Overview

The Social Stock Exchange networks enable socially minded investors to back and invest in social enterprises and non-profit organizations. It was introduced in India, and this groundbreaking endeavour changes the focus of investments to include social and environmental impacts in addition to financial gains.

The SSE operates in a way that is comparable to that of a traditional stock market, allowing companies to generate capital through the sale of stocks. However, the social stock exchange license differs from the traditional stock market license by prioritizing the assessment of each listing's social impact rather than just financial gains and recognising that social audit agencies carry out this evaluation process to guarantee transparency and credibility.

Objectives of Social Stock Exchange License in India

Obtaining a social stock exchange license in India is crucial for the growth of social enterprises. Besides this, it boosts the funding opportunities for NPOs.

The vision of the social stock exchange is to create an accountable, efficient, as well as transparent funding mechanism. The key objectives of SSEs in India are mentioned below for your better understanding:

1. Social Impact Empowerment

The main goal of SSE is to increase social impact empowerment, focusing on critical societal issues like poverty alleviation, healthcare, education, environmental sustainability, and gender equality. Through investing in these organizations, the SSE fosters the advancement of their projects and advocates for beneficial transformation.

2. Maximise Funding Potential

Any social stock exchange or SSE that delegates a path for social enterprises and non-profits to secure and maximise funding potential from a larger pool of investors allows these organizations to expand their operations, introduce new solutions, and achieve longer-term growth.

3. Boosting Corporate Social Responsibility

The social stock exchange license supports the government's importance of corporate social responsibility efforts by helping companies allocate their CSR funds in a more targeted manner. It promotes businesses to follow rules and participate in social progress.

4. Governance & Oversight

The SSE upholds strict governance & other oversight to guarantee investors have access to clear information regarding the social impact of their investments. This high level of accountability helps build trust with investors and beneficiaries.

5. Inspire Conventional Investors

The SSE's goal is to lure traditional investors who want to align their investments with their beliefs by establishing a specialized impact investing platform and creating a controlled platform with standardized reporting frameworks that can reduce the perceived risks related to impact investing and attract more involvement from institutional investors.

6. Aids Sustainable Development Goals

SSE supports the United Nations SDGs by directing funding towards projects that will help to achieve these worldwide targets and by prioritizing investments that have positive impacts on society and the environment; the SSE is fundamental in promoting sustainable development.

Benefits of Social Stock Exchange License

Social enterprises, not-for-profit organizations, and development sector organizations work to bring positive transformation to society. However, due to a lack of capital and an irregular supply of cash, they fail to operate for the same cause. Registering on the social stock exchange is a way to tackle fundraising challenges, and NPOs and social enterprises will have access to enough capital to make a significant impact on society. There are certain benefits of a social stock exchange license, as mentioned below:

1. Investment Initiatives

SSE allows investors initiatives to invest in projects that could have a real impact on society. By investing in social enterprises, individuals can drive positive impact by directing their capital towards these organizations.

2. Investment Portfolio

SSE provides investors with an opportunity to access the portfolio for investment purposes and to distribute their investment portfolios by adding socially impactful ventures. Diversifying helps reduce risk and makes an investment portfolio more resilient.

3. Unification of Social Ventures

SSE provides social enterprises and non-profits with the opportunity to tap into a broader range of investors that was previously restricted to grants and donations in the form of unified social ventures. This fresh source of funding promotes creativity and growth potential.

4. Innovating for Impact

The SSE encourages an environment in which social enterprises are motivated to create new and inventive answers to urgent social issues through the help of innovation in the social impact. It could result in groundbreaking progress in different industries.

5. Standard Reporting Measure

SSEs frequently set up standard reporting measurements and other structured guidelines for social and environmental performance, offering investors visibility and responsibility for the effects of their investments. It could aid in establishing trust and confidence within the market.

Challenges with Social Stock Exchange

Although the social stock exchange license shows great potential, there are obstacles in its execution. To address these obstacles, there is a need for cooperation from regulatory bodies, financial institutions, impact investors, and social enterprises to establish a strong evaluation framework for social impact, raise awareness among investors, and ensure the financial sustainability of listed organizations.

 Ongoing discussion and exchange of information will play a key role in improving the SSE framework and increasing its efficiency. We will assist you throughout the process of obtaining the social stock exchange license with our stock exchange consultant for the betterment of your enterprises or NPOs.

Requirements for Obtaining a Social Sock Exchange License

There are certain minimum requirements for the not-for-profit organization to register and obtain the Social Stock Exchange License under the terms and conditions of Section-292F (1) of the ICDR Regulations under the following criteria:

Legal Prerequisites

  1. The entity must be registered as an NPO with the registration certificate valid for the period of the next 12 months at the time seeking the registration with the SSE for these entities mentioned below:
  2. Trusts that are charitable registered under the Public Trust Statute of the relevant state.
  3. Trusts that are charitable are registered under the Societies Registration Act of 1860.
  4. Trusts that are charitable registered under the Indian Trust Act of 1882
  5. Any company incorporated under Section-8 of the Companies Act of 2013.
  6. If the NPO is owned or even controlled by the government or a private institution, the ownership and control of the governing papers, such as the MoA and AoA or a trust deed or bylaws, must be disclosed.
  7. To be exempted under the Income Tax Act for getting the registration certificate under Section-12A or 12AA or 12 AB given under the same Act that is valid for the period of the next 12 months and to not to give notice or any ongoing scrutiny by the Income Tax.
  8. The validity period of the NPO after getting the registration certificate is for a minimum period of 3 years.
  9. The Income Tax Act of 1960 provides for the deduction under Section-80G for the entity to make sure if the tax deduction is available to the investors.
  10. To be eligible to be regarded as a social enterprise, it is required to comply with the regulations under Section-292E of the ICDR Regulation as specified under the social stock exchange.

Minimum Fund Flows

  1. Annual spending for the past financial years for the receipts or the payments from audited accounts or fund flow management for the minimum amount of 50 Lakh INR.
  2. Funding is to be held in the past financial year for the receipts generated from the audit accounts of any fund flow management for at least the amount of 10 Lakh INR.

NPOs and Zero-Coupon Instruments: Initial Disclosure

There are certain minimum initial disclosure requirements for the NPOs to raise funds through issuing zero coupons for zero principal instruments in the terms specified under Section 292 K (1) of the ICDR Regulations, as mentioned for your better understanding.

It also has been given under the Social Stock Exchange License governing council with the mandate of the structure of the draft of the funds raising or increasing the necessary documents that can be hosted on the SSE requirement on its website. There are also certain SSEs to make sure that all the required documents contain the following minimum disclosures:

1. Perception

For any organization’s activities, the interventions and other programmes should be in line with the objectives and aims stated in its constitution.

2. Targeted Segment

The organization has identified its target audience and achieved its planned goals through outreach. It is important to identify and understand the target segment impacted by the problem and how they are affected. The NPO should also explain how its approach aims to enhance inclusion for its customers or recipients.

3. Plan

When developing a plan to achieve a goal, consider both strengths and lessons from obstacles.

4. Management & Governance

The institution possesses a board of directors along with information on the board's structure, membership, and dates of meetings (important topics addressed). Information on important members of the management team, including those responsible for programs, fundraising, marketing, communications, finance, and HR.

The organisation reveals if it issues letters outlining roles and responsibilities to employees and volunteers, conducts regular performance evaluations, and more.

5. Finance & Compliance

Your business or organization should have a physical existence for its operation and shares to address for visits. The organization provides audited annual accounts for the most recent three fiscal years, with no significant qualifications or irregularities reported by the auditor. These regulations regarding taxation of income, notifications received and so on.

6. Social Impact & Credibility

There has been a detailed description of the past social impact based on the terms of the parameters that have been specified under para- d (5) of this particular circular and also other documents related to the Registration purposes like the trust deed, MoA, AoA and the address proof, also the IT Pan under the 12A, 12 AB,12AA, also the FCRA certificate and returns and related to monetary benefits to the governing members.

Regulation 91C Disclosure for NPOs on SSE

There are certain annual disclosures by the NPOs on social stock exchange licenses that have raised funds as per the terms of the Regulation-91C of the LODR Regulation has been given under certain disclosure within 60 days from closing the financial year:

Disclosure on a General Basis

Name of the business or organization, location of the headquarters and its operations. The goal of the organization or business, activities, products or services. Also, the outreach of the organization for different types and the number of credits, institutional and indirect beneficiaries. The list of the top investors or donors’ budget-wise and also the list of the top 5 programs or the interventions budget-wise.

Disclosure on Governmental Basis

The ownership and legal form with the government structure overview the boards, management committee structures, other mandates, membership, charters, internal controls and policies, as the details about the other governing body with executive key responsibility, number of meetings by the governing body, organizational potential risk and with reporting policies and other compliance management.

Disclosures on Financial Features

Disclosure should be given on the financial statement, such as the balance sheet, cash statement, income statement, and program-wise fund utilization for the particular year. The auditor report has to be given with the auditor's details.  The guidance note has been provided under Annexure-1 of the aforementioned direction, and additional parameters must be disclosed by the NPO annually.

SSE Social Enterprises: Regulation 91E Impact Reporting

Every Social Enterprise must submit a properly audited Annual Impact Report to SSE within 90 days after the completion of the Financial Year. The AIR will encompass both the qualitative and quantitative elements of the social impact created by the organization, as well as any impact from the project or solution benefiting from funds raised on the social stock exchange license.

 If an NPO is registered without including any security, the AIR needs to address the NPO's important activities, interventions, programs, or projects for the year and explain how significance is determined. If an activity, intervention, program, or project is included in a listed security, it will also be considered as a significant activity, intervention, program, or project.

A Social Impact Fund must reveal an overall Annual Impact Rate for the fund, encompassing all recipient organizations that are social enterprises using the Social Stock Exchange (SSE) for funding. The annual impact report should, at its minimum, cover the following aspects mentioned below for your better understanding:

1. Planning & Intent

There should be planning and intent for your business to overcome the challenges related to the social environment and also with the impact on the target segment. The outcome of the activities, programs and interventions to negate the negative outcomes.

2. Approach

The approach is to be followed to determine the baseline status or situation analysis or the context description to start the activities and also the performance trends.

3. Effect on the Score Card

The social metrics should be monitored and briefly discuss the narratives of the impact on the target segment.

4. Under Section-91F of LODR Regulations for Utilisation of Funds

There have been the listed NPOs that have to submit the details of the utilisation of funds to the social stock exchange that has been mandated under the Regualtion-91F of the LODR Regulation within 45 days from the end of the quarter. 

Why Choose Enterslice to Obtain a Social Stock Exchange License?

At Enterslice, we assist Non-profit organisations looking to register with the SSE and get a social stock exchange license. Our comprehensive social stock exchange services include the following-

1. Eligibility Assessment

Our team of social stock exchange consultants will evaluate the eligibility of your organization for the social stock exchange based on SEBI regulations.

2. Compliance Support

We provide seamless end-to-end compliance support, from the handling process and application filing to registration completion, so you can focus on your mission.

3. Document Preparation and Review

Our expert will assist you in preparing and reviewing all the relevant documents to channel the registration work effortlessly.

4. Financial Reporting Expertise

You might be looking for someone who can manage the financial reporting part for the SSE registration. Your financial reporting needs end with our expert guidance and end-to-end service.

5. Investor Connect

We will help you establish connections with potential investors on the social stock exchange, creating the route for funding opportunities and accelerating your growth.

6. Post-listing Support

We are also here to extend our support beyond the listing on SSE and the acquisition of a social stock exchange license.

7. Social Audit

Our expert team will conduct a social audit of your venture and recommend the right pathway to help you grow and expand it in the future.

Collaborate with Enterslice, fulfil your dream of being listed on a social stock exchange, and obtain a social stock exchange license with minimum effort.

FAQs on Social Stock Exchange License

Social stock exchanges permit the listing of NPOs on the stock exchanges and can provide an alternative fundraising structure.

The SGBS Unnati Foundation is the first entity to be listed on a social stock exchange in India.

Retail investors are authorised to invest in the securities offered by the for-profit social enterprise under the main board.

Certain social stock exchange benefits are available for first-time retail investors, who are allowed 100% tax exemptions on their investment in the SSE MF structure.

The National Stock Exchange of India is to receive the final approval from the SEBI to initiate a social stock exchange as a separate body.

The social stock exchange network in India has been introduced by the honourable Finance Minister of India, Shrimati Nirmala Sitaraman.

The purpose of the social stock exchange is to provide a regulated platform which brings togetherness for social enterprises and donors.

The Approving authority for the social stock exchange is the Stock Exchange Board of India (SEBI).

Yes, any NPO promoted by promoters of the corporate body is mandated to be in operation for 3 years before registering on the SSE.

No, zero coupon and zero principal instruments for raising funds shall be issued only to Not-for-profit organizations (NPOs) on the social stock exchange.

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