The Securities and Exchange Board of India (Sebi) has made changes to not-for-profit organisations’ (NPOs) registration requirements on the social stock exchange (SSE) and the minimum subscription norms for zero-coupon zero-principal instruments.
The regulator has extended the registration period for NPOs to 3 years from 2 years, as per its circular dated Wednesday. This permits them to get registered on the SSE without requiring to raise capital for one additional year, subject to approval from the exchange. This has been taken into account after considering the practical challenges NPOs face with respect to statutory and regulatory approvals.
Sebi also reduced the minimum subscription requirement of the zero-coupon zero-principal instruments to 50% from the current 75%. Before granting any in-principal approval for partial fund raise, the SSE must undertake due diligence to ensure that funds raised are capable of being deployed in a meaningful manner. In case of an undersubscription, funds should be refunded to investors.
These changes are brought with an aim to facilitate ease of fund raising and encourage greater participation by NPOs on the SSE. These were also consulted with the SSE’s advisory committee.
The SSE is a regulated, dedicated segment on stock exchanges that enables social enterprises – both NPOs and for-profit organisations – to raise capital for social welfare activities through debt, equity, or zero-coupon zero-principal instruments. Such entities should spend at least 67% of their activities qualify as eligible activities for their target population to be eligible for registration.
In March, Sebi had reduced the minimum investment value of an investor in the social impact fund of alternative investment funds to ₹1,000 from ₹200,000. This aligned with the minimum application size for subscribing zero-coupon zero-principal instruments.
