DAILY NEWS ANALYSIS

GS-III : Economic Issues Stock market

08 March, 2023
5 Min Read

Social Stock Exchange

SEBI gave final approval to National Stock Exchange of India to establish the Social Stock Exchange (SSE).

What is A social stock exchange?

The SSE would operate as a distinct division within the current stock exchange and assist social businesses in raising money from the general public through its mechanism.
It would act as a platform for businesses to get funding for their social activities, gain publicity, and offer greater transparency on the mobilisation and use of funds.
Securities sold by for-profit social enterprises (SEs) on the Main Board are the only ones in which retail investors may invest.
Only institutional and non-institutional investors are permitted to purchase securities issued by SEs in all other circumstances.

Eligibility:

Any non-profit organisation (NPO) or for-profit social enterprise (FPSEs) that demonstrates the importance of social intent will be recognised as a SE, making it possible for it to register with or be listed on the SSE.
In accordance with SEBI's ICDR Rules, 2018, among the 17 tenable criteria are those that contribute to eradicating hunger, poverty, malnutrition, and promoting education, employment, equality, and environmental sustainability.
Business foundations, political or religious organisations, professional or trade associations, infrastructure corporations, and housing providers (apart from those providing affordable housing) are not eligible.
NPOs would be considered disqualified if they received more than 50% of their financing from corporations.

Fundraising for NPOs:

NPOs may collect funds by issuing Zero Coupon Zero Principal (ZCZP) Instruments through private placement or public offering, or by accepting donations from mutual funds.
ZCZP bonds are distinct from ordinary bonds in that they have no principal payment due at maturity and no coupon.
The current minimum issue size for ZCZP issuance is set at Rs 1 crore, and the minimum application size for subscription is set at Rs 2 lakhs.
Moreover, Development Impact Bonds are offered following project completion and are provided based on pre-established social criteria at pre-established costs/rates.

Money Raising for FPSEs:

Before raising money through SSE, FPEs are not required to register with SSE.
It can raise money by selling stock shares, selling equity shares to an AIF, such as a Social Impact Fund, or selling debt instruments.

Also Read About : - Funding for NGOs

Source: The Economic Times

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