Regulatory Framework for Social Stock Exchange

1. Objective

1.1. This memorandum seeks approval of the Board to amend Securities and
Exchange Board of India (Issue of capital and Disclosure Requirements)
Regulations, 2018 (“ICDR Regulations”), Securities and Exchange Board of India
(Listing Obligations and Disclosure Requirements) Regulations, 2015 (“LODR
Regulations”) and Securities and Exchange Board of India (Alternative Investment
Funds) Regulations, 2012 in relation to providing a regulatory framework for Social
Stock Exchange (“SSE”).

2. Background

2.1. The Board in its meeting held on September 28, 2021 approved the framework
for SSE as contained in the Memorandum (Board Memorandum placed at
Annexure I). Further, it was also decided that the matters relating to Ministry of
Corporate Affairs (“MCA”), Ministry of Finance (“MoF”) and Ministry of Home
Affairs (“MHA”) may be pursued with them.

2.2. The action matrix as provided at Para 5.4 of the Board Memorandum containing
the framework for SSE and the updated status in the matter is as follows:

Sr. Broad Recommendation Action Point Agency Status

No. (WG+TG) Concerned
1 SSE shall be a separate Amendment to ICDR SEBI and Amendment
segment on existing Stock Regulations Stock proposed
Exchanges. Exchanges
2 Eligibility of a social Amendment to ICDR SEBI Amendment
enterprise, Primacy of Regulations; Cross proposed to
Social Impact reference in SEBI ICDR and AIF
(Alternative Investment Regulations.
Funds) Regulations, 2012 No amendment
(“AIF Regulations”) and necessary to
SEBI (Mutual Funds) MF Regulations
Regulations, 1996 (“MF at this stage.
Regulations”).

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Sr. Broad Recommendation Action Point Agency Status
No. (WG+TG) Concerned

3 Non Profit Organizations Amendments to ICDR SEBI and Amendment

(“NPOs”) be registered Regulations, issuing Stock proposed
with SSE prior to raising guidelines to exchanges for Exchanges
funds through SSE. mandatory registration of
NPOs
Exchanges to set
registration framework
based on amendments in
ICDR Regulations
4 Public issue of equity [by Amendments in ICDR SEBI No action
NPOs /For Profit Regulations to resolve proposed yet.
Enterprises (“FPEs)] difficulties, if any, in terms of
FPEs may be listed on eligibility criteria for NPOs
Main Board/ SME/
Innovators Growth
Platform in terms of
existing eligibility and
disclosure criteria provided
in ICDR Regulations.
Further, NPOs may list on
the SSE.
5 Modes available for fund ZCZP will have to be MoF to
raising for NPOs other notified as a security under include ZCZP
than Equity (section 8 SCRA as a security
companies) shall be; under SCRA

(i) Zero Coupon Zero SEBI to

Principal Instrument Introduction of new chapter amend ICDR Amendment
(ZCZP) under ICDR Regulations for Regulations proposed
issuance of ZCZPs by to permit
NPOs ZCZP
issuance.

(ii) Development Impact Increase awareness and SEBI To be taken up

Bonds creation of appropriate later, through
regulatory framework Circular(s)
(iii) Social Impact Fund Amendment to AIF SEBI Amendment
(currently known as Social Regulations proposed
Venture Fund {“SVF”})
(iv) Donations by investors SEBI to sensitize AMFI to SEBI To be taken up
through Mutual Funds increase awareness. later, through
Circular(s)

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Sr. Broad Action Point Agency Status
No. Recommendation Concerned
(WG+TG)
6 Disclosures Amendment to ICDR SEBI Amendment
Regulations, LODR proposed to ICDR
Regulations, AIF and LODR. No
Regulations, MF amendment
Regulations necessary to AIF
and MF Regulations
ICAI to at this stage.
Updation of technical guide amend the Matter has been
on Accounting for Not-for- technical taken up with ICAI.
Profit Organizations guide.
7 Social Auditor: Audit of Reference to ICAI; ICAI and Amendment
social impact i.e. social Certification program to be NISM proposed w.r.t.
audit shall be developed by NISM in mandating social
mandatory for Social consultation with ICAI, IRs audit in LODR.
Enterprises on SSE and reputed institutions Matter also taken up
with ICAI and NISM.
Action at the end of
ICAI and NISM
under process
8 Capacity Building Fund Reference to NABARD, SEBI to Matter has been
(“CBF”) SIDBI and Stock engage with taken up with
Exchanges stakeholders NABARD and SIDBI
for creation of
CBF.
9 Corporate Social MCA to consider MCA Matter is under
Responsibility (“CSR”) recommendations related to consideration
Related CSR
Recommendations
10 Tax related Department of Revenue to Department Matter is under
recommendations consider tax related of Revenue consideration
recommendations
11 Clarify Rule 4 of Clarity required on Rule 4 of MHA Matter has been
Foreign Contribution FCRR taken up with MHA.
(Regulation) Rules,
2011 (“FCRR”)
whether foreign
entities shall be eligible
to invest in SVFs listed
on SSE as the donors
will not be taking
decisions/ will not have
any discretion on
deployment of their
funds to specific NPOs

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 2.3. In respect of items at Sr. No. 1 to 6 above, excluding 5(iii) and 5(iv), SEBI
constituted a task force of representatives of Exchanges and SEBI to provide
further detailing so as to operationalize the framework by means of amendments
to regulations.

2.4. The matters for amendments to SEBI Regulations viz. ICDR Regulations, AIF
Regulations, LODR Regulations, as highlighted in the table above, and the
proposals in these regard are discussed point wise below.

3. SSE a separate segment on existing Stock Exchanges:

3.1. Recommendation as approved by the Board

“In line with the recommendations of the expert groups, the SSE may be created
as a separate segment on existing Stock Exchanges. Towards this end, it is
proposed that necessary amendments may be made to ICDR Regulations”

3.2. Based on deliberations held within the task force, it was felt that there would be a
need for handholding of social enterprises in order to be registered with SSE. A
governing council comprising mostly of representatives having expertise in
implementation of social projects would appreciate the nuances of the
requirements of fund raising for social enterprises better.

3.3. Proposal:

3.3.1. ICDR Regulations may be amended as follows:

3.3.1.1. A new chapter “X-A” shall be inserted in the ICDR Regulations to

deal with aspects of SSE, and Zero Coupon Zero Principal Instrument.

3.3.1.2. An SSE shall constitute an SSE Governing Council to have oversight

on its functioning.

3.3.1.3. SEBI shall specify the composition and terms of reference for the
SSE oversight committee

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 3.3.2. Amendments to ICDR Regulations are placed at Annexure III.

4. Eligibility of a social enterprise, Primacy of Social Impact

4.1. Recommendation as approved by the Board

A definition of social enterprise may be introduced in the ICDR Regulations.

Suitable cross-references in other regulations such as AIF Regulations and MF
Regulations, may be made to ensure eligibility for social enterprises using these
routes.

4.2. Proposal

4.2.1. ICDR Regulations may be amended so as to define Social Enterprise, Not-

for profit organization and For-profit social enterprise.

4.2.2. A social enterprise shall be defined in terms of eligibility requirements as

stated in Annexure II.

4.2.3. Not for profit organization shall mean a social enterprise which may be any
of the following organizations:

4.2.3.1. a charitable trust registered under the Indian Trusts Act, 1882

4.2.3.2. a charitable trust registered under the public trust statute of

the relevant state

4.2.3.3. a charitable society registered under the Societies

Registration Act, 1860

4.2.3.4. a company incorporated under section 8 of the Companies

Act, 2013

4.2.3.5. any other entity as may be specified by the Board

4.2.4. For profit social enterprise shall mean a social enterprise which is either a
for profit company or body corporate and does not include a company
incorporated under Section 8 of the Companies Act, 2013
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 4.2.5. Certain other definitions are also proposed to be introduced as follows:

4.2.5.1. “Draft fund raising document” shall mean a document filed with a
Social Stock Exchange in relation to a proposal for a public issue of Zero
Coupon Zero Principal Instrument by a not for profit organization
registered with the Social Stock Exchange

4.2.5.2. “Final fund raising document” means the final fund raising document
filed with the Social Stock Exchange pursuant to incorporation of
observations issued in respect of the draft fund raising document by the
Social Stock Exchange.

4.2.5.3. “Social Auditor” means an individual registered with a self-regulatory

organization under the Institute of Chartered Accountants of India or such
other agency, as may be specified by the Board, who has qualified a
certification program conducted by National Institute of Securities Market
(NISM) and holds a valid certificate issued by NISM.

4.2.5.4. “Social Audit Firm” means any entity which has employed Social
Auditors and has a track record of minimum three years for conducting
social impact assessment or social audits.

4.2.5.5. “Social Stock Exchange” means a separate segment of a recognized

stock exchange having nationwide trading terminals permitted to register
not for profit organizations or list the securities issued by not for profit
organizations in accordance with provisions of these regulations.

4.2.6. AIF regulations may be amended so as to introduce the terms ‘Social Stock
Exchange’ and ‘Social Enterprise’ which shall have the same meaning as
specified in ICDR Regulations

5. Non-Profit Organization (NPO) to be registered with SSE prior to raising funds

through SSE

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 5.1. Recommendation as approved by the Board

“SEBI may, through suitable amendments in the ICDR Regulations, issue

guidelines to stock exchanges, for mandatory registration of NPOs. The basic
registration criteria may include due diligence on constitutional documentation
such as validity of registration certificate, details of ownership and control, valid
registration under Income Tax framework, minimum Rs 50 lakh annual spending
in past financial year, and minimum Rs 10 lakhs funds raised in past financial
year”

5.2. Based on deliberations held within the task force, it was felt that SSE should be
provided liberty to seek additional information from the NPO for the purpose of
granting registration.

5.3. Proposal

5.3.1. ICDR Regulations may be amended so as to mandate a not for profit

organization to compulsorily seek registration with an SSE before it raises
funds through SSE: Provided that a not for profit organization may choose
to only get registered on SSE and not raise funds through SSE.

5.3.2. Minimum requirements for registration may be specified by SEBI through

Circular(s).

5.3.3. SSE may provide any additional requirements for registration as deemed fit.

6. Modes available for fund raising for NPOs (other than Equity in case of Section8
Company)

6.1. Zero Coupon Zero Principal Instrument

6.1.1. Recommendation as approved by the Board

6.1.1.1. A Zero Coupon Zero Principal instrument issued by an NPO for a

specific project for raising funds on SSE may be notified as a security
under SCRA.
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 6.1.1.2. A new chapter may be introduced under ICDR Regulations for
issuance of ZCZP by NPOs.

6.1.1.3. The disclosures in offer document for ZCZPs shall be in terms of

differentiators and parameters identified in Annexure III 2(d) of the TG
report.
6.1.2. Based on deliberations held within the task force, it was felt that instruments
through which an NPO shall raise funds shall be clearly indicated within the
ICDR Regulations. The task force noted that in the case of an initial public
offer by companies certain entities are not eligible to make an initial public
offer. These are typically entities which have been debarred by the Board,
or if its promoters/ directors have been declared as wilful defaulters. Further,
it was felt that an option may be provided in the regulations so to allow SEBI
to introduce other means to raise funds, in due course, based on
requirements of the sector.

6.1.3. Proposal:

ICDR Regulations may be amended to state the following:

6.1.3.1. A not for profit organization may raise funds on SSE through:
i. Issuance of Zero Coupon Zero Principal Instrument to
institutional investors and/or non-institutional investors in terms
of Regulations.
ii. Equity (under the Main Board) or Debt in case of a section 8
company.
iii. Donation through Mutual Fund scheme as specified by SEBI.
iv. Any other means as specified by SEBI.

6.1.3.2. A social enterprise shall not be eligible to register or raise funds

through SSE:

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 i. if the social enterprise, any of its promoters, promoter group or
directors or selling shareholders, trustees are debarred from
accessing the securities market by the Board.
ii. if any of the promoters or directors or trustees of the social
enterprise is a promoter or director of any other company or
social enterprise which has been debarred from accessing the
securities market by the Board.
iii. if the social enterprise or any of its promoters or directors or
trustee is a wilful defaulter or a fraudulent borrower.
iv. if any of its promoters or directors or trustee is a fugitive economic
offender.
v. if the social enterprise or any of its promoters or directors or
trustee has been debarred by the MHA or any other ministry of
the Central Government or State Government or Charitable
Commissioner or any other statutory body.
6.1.3.3. W.r.t issuance of ZCZP, the following amendments may be
considered:
i. ZCZP Instrument shall be issued only by an NPO registered on
SSE, bearing a tenure specific to the duration of project/ activity
for which it intends to raise funds. The instrument shall have zero
coupon and no principal payment at maturity.
ii. NPOs shall be required to file a “fund raising document” with SSE
where the NPO is registered for the purpose of raising funds
through ZCZP, containing all material disclosures which are true
and adequate to enable the applicants to take an informed
decision.
iii. SSE shall specify the details to be incorporated in such fund
raising document. However, SEBI shall specify the minimum
disclosures required in a “fund raising document” through
circular(s).
iv. SSE may be permitted to mandate additional disclosures by
providing observations to the draft fund raising document.

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 v. The fund raising document shall be available on the website of
SSE and the NPO for a period of 21 days for public comments.
vi. ZCZP shall be issued in dematerialized form only.
vii. SSE shall specify the additional norms in respect of issue
procedure including on agreements with depositories, banks, etc.
and ASBA related matters, duration for public issuance,
allocation methodology and any other ancillary matter related to
issue procedure.
viii. SSE shall be responsible for maintaining the details of the
allotment pursuant to issuance of ZCZP by an NPO.
ix. The minimum issue size shall be rupees one crore.
x. The minimum application size shall be rupees two lakhs.
xi. The Minimum subscription required to be achieved shall be 75%
of the funds proposed to be raised through issuance of ZCZP. In
case of any under subscription, the SSE shall, in the donation
(fund raising/ or any other name) document, provide details on
the following:
xii. a) manner of raising balance capital in case of such under
subscription (between 75% and 100%).
xiii. b) impact on the objective in case such under subscription is not
arranged.
xiv. c) funds raised shall be refunded in case subscription is less than
75% of the issue size
xv. An NPO registered on SSE may be permitted to make private
issuance of ZCZP to Social Impact Fund(s) registered under the
applicable provision of SEBI (Alternative Investment Fund)
Regulations 2012. The provisions related to public issuance of
ZCZP shall mutatis mutandis apply to such private issuance.
xvi. The public issuance of ZCZP by a registered NPO shall be
deemed to be in compliance with Rule 19 of the Securities
Contracts (Regulation) Rules, 1957
6.2. Development Impact Bonds (DIBs) structure

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 6.2.1. Recommendation as approved by the Board

DIB structures needs more awareness under SSE once ZCZP bonds have
been notified as a security. Amendment to appropriate Regulations, if any, will
be considered by SEBI.

6.2.2. Proposal

The matter may be taken up pursuant to notification of framework for issuance

of ZCZP by way of Circular.

6.3. Social Impact Funds

6.3.1. Recommendation as approved by the Board

6.3.1.1. Social Venture Funds may be rechristened as Social Impact Funds

(SIFs).
6.3.1.2. In view of the proposal of defining Zero Coupon Zero Principal Bonds
(ZCZP) as a security under SCRA, Social Venture Funds will be
enabled to invest 100% of their funds in a social enterprise and provide
social returns to its investors. A different nomenclature may be created
to identify SIFs which employ only ZCZPs for investment. Such units
may also have a different nomenclature.
6.3.1.3. The minimum corpus requirements for SIFs may be reduced from Rs.
20 Crores to Rs. 5 Crores.
6.3.1.4. The minimum subscription amount may be set as Rs. 2 lakhs (for
individuals) for SIFs investing 100% in ZCZP issued by not for profit
social enterprises (NPOs) which are registered or listed on the Social
Stock Exchange. For corporates it shall continue to remain Rs. 1
Crore.
6.3.1.5. The reference to “muted returns” in the AIF regulations may be
removed
6.3.1.6. Additional disclosures may be mandated at the initial placement
document level and at periodic level to cover aspects such as

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 governance, financials, and social impact etc. and matters mentioned
in Annexure III 2(a) of the TG report.
6.3.1.7. Suitable amendments may be made in the AIF regulations to give
effect to the above proposals.
6.3.2. Earlier, the recommendations of the Working Group on Social Stock
Exchange and public comments received in respect of SVFs along with
recommendations of Technical Group on social stock exchange were
analysed, and the proposals emanating from such internal deliberations were
discussed in the meetings of Alternative Investment Policy Advisory
Committee (AIPAC) held on November 03, 2020 and July 7,2021. The
framework for SSE including the major proposals with regard to SVFs and the
proposal to suitably amend the AIF Regulations to implement such proposals
were approved by the Board in its meeting held on September 28, 2021.

6.3.3. Initial and continuous disclosures are being mandated for Social Enterprises
(SEs) through the proposed amendments in ICDR Regulations and LODR
Regulations respectively. Since, these SEs would be investee companies for
Social Impact Funds (SIFs), disclosures regarding the social aspect of such
investments would get covered under disclosures mandated at SE level.
However, in due course if it is felt that additional disclosures are required at
SIF level (which invest purely (100%) in securities of NPOs registered or listed
on SSE) then such additional disclosures in the PPM of SIFs may be
mandated by way of a circular. Hence, amendment to AIF regulations may
not be required at this juncture for the purpose of initial and continuous
disclosures.

6.3.4. Definition of ‘Social Stock Exchange’ and ‘Social Enterprise’

6.3.4.1. In the context of Social Stock Exchange (SSE), the Expert Group
recommended the eligibility criteria for Social Enterprise which will be
listed or registered on SSE (hereinafter referred as SEs). The terms
SSE and SE will be defined in the SEBI (Issue of Capital and
Disclosure Requirements) Regulations, 2018 (‘ICDR Regulations’).

Page 12 of 26
 AIPAC also recommended that definition of SEs may be as
recommended by the Expert Group.

Proposal
6.3.4.2. Accordingly, it is proposed to amend the AIF Regulations to introduce
the terms ‘Social Stock Exchange’ and ‘Social Enterprise’ which shall
have the same meaning as specified in ICDR Regulations.
6.3.5. Change in nomenclature of ‘Social Venture Fund’:

6.3.5.1. The Expert Group recommended that SVFs may be rechristened as

SIFs.
6.3.5.2. Based on industry feedback, it is understood that the nomenclature of
SVF is not in line with current international norms, wherein such
investments are generally referred to as ‘impact investing’. As
investors may be more familiar with terminology similar to ‘impact
investing’, it is desirable to rename the terms using such nomenclature
which has wider acceptance. AIPAC also agreed to aforesaid
recommendation.

Proposal
6.3.5.3. Accordingly, it is proposed to amend the AIF Regulations to replace
the term ‘Social Venture Fund’ with ‘Social Impact Fund’.
6.3.5.4. It is also informed that the existing Social Venture Fund may also be
referred to as Social Impact Fund.

6.3.6. Definition of ‘SIFs’ and removing reference to ‘muted returns’

6.3.6.1. ‘Social Venture Fund’ is defined in the AIF Regulations as an AIF

which ‘invests primarily in securities or units of social ventures and
which satisfies social performance norms laid down by the fund and
whose investors may agree to receive restricted or muted returns.’
6.3.6.2. The Expert Group recommended to remove reference to ‘muted
returns’ in the AIF regulations. Further, as per industry feedback, the

Page 13 of 26
 phrase ‘restricted or muted returns’, may not be appealing to the
investors and fails to convey the intent/objective of such SVFs. AIPAC
also agreed with recommendation to remove reference to ‘muted
returns’ with respect to SVFs in AIF Regulations.

Proposal
6.3.6.3. It is, therefore, proposed that reference to muted returns may be
deleted from the definition of SVF in Regulation 2(1)(v). Regulation
16(4)(d) of the AIF Regulations which states that SVFs may accept
muted returns for their investors may also be deleted.
6.3.6.4. Further, to enable fund raising for SEs through SIFs, it is proposed to
amend the AIF Regulations to define ‘Social Impact Fund’ as an AIF
which invests primarily in securities, partnership interests or units of
social ventures, or securities of SEs as defined in ICDR Regulations
and which satisfies social performance norms laid down by the fund.
6.3.7. Minimum Corpus of SIFs
6.3.7.1. In terms of Regulation 10(b) of the AIF Regulations, each scheme of
an AIF shall have a corpus of at least INR 20 crore. Data available with
SEBI shows that few SIFs have raised funds or made significant
investments. Expert Group has recommended that the minimum
corpus for an SIF may be reduced to INR 5 Crore from the current
requirement of INR 20 Crore.

Proposal

6.3.7.2. Considering the recommendations of Expert Group, it is proposed to

amend Regulation 10(b) of AIF Regulations to specify that the
minimum corpus for a scheme of SIF shall be INR 5 Crore.
6.3.7.3. It is also proposed that this benefit of lower corpus of INR 5 crore may
also be made available to existing SVFs. This would benefit such
existing SVFs who have not yet received capital commitment of INR
20 crores. This may be specified by way of circular.

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6.3.8. Enabling SVF exclusively for SSE
6.3.8.1. The Board in its meeting held on September 28, 2021 had approved
the proposal to include Zero Coupon Zero Principal Bonds (ZCZPs)
issued by NPOs for raising funds on SSE as a security under SCRA,
1956. This would enable SIFs to invest 100% of their funds in a SEs
(i.e. NPOs) and provide social returns to their investors. A different
nomenclature was proposed to be created to identify SIFs which
employs only ZCZPs for investment. Units issued by such SIFs may
also have a different nomenclature.

Proposal
6.3.8.2. In this regard, it is proposed to amend AIF regulations to provide that
SIFs may be set up to exclusively deploy 100% of their investable
funds in securities of not- for- profit SE listed or registered on SSE.
6.3.8.3. Further, SIF may be permitted to issue ‘social units’ against the
amount contributed by an investor wherein the investor has opted to
receive only social returns/ benefits and no financial return by way of
investment in securities of NPOs listed or registered on SSE. It is
proposed to amend AIF Regulations to introduce definition of social
units and enable SIFs to issue social units.
6.3.8.4. Further, the schemes launched by such SIFs as stated at para
6.3.8.2(b) may identify themselves as SIF-SSE in the private
placement memorandum of the schemes, other fund documents and
disclosures made to prospective investors.
6.3.8.5. While the existing SVFs are required to invest at least 75% of
investable funds in securities and partnership interest of social
venture, flexibility is provided with respect to balance amount. It is
proposed that the existing SVF may invest balance investable funds in
securities of NPOs listed or registered on SSE, provided the consent
of at least 75% of the investors by value of their investment is obtained.
The investor consent may be required since the deployment of such
investable funds would be in securities which do not yield financial
return/benefit to investors.
Page 15 of 26
 6.3.8.6. The proposal at para 6.3.8.4 and 6.3.8.5 may be specified by way of
circular.

6.3.9. Minimum investment in SIF-SSE

6.3.9.1. In terms of Regulation 10(c) of the AIF Regulations, an AIF shall not
accept from an investor, an investment of value less than INR 1 crore.
However, the Expert Group recommended to reduce the minimum
amount that can be invested in an SIF to INR 2 lakhs (for individuals)
in case of SIFs investing 100% of investable funds in securities issued
by NPOs which are registered or listed on the SSE and to retain INR
1 Crore for corporates.
6.3.9.2. Reduction in investment amount as suggested by the Expert Group
may encourage more investors to participate in SIFs and thereby
channelize funds towards social causes. As the NPOs are required to
be registered or listed on SSE prior to fund raising, this enables
transition towards disclosure driven fund raising system. Thus, a lower
threshold for minimum investment by individuals may be considered in
case an SIF is launched to invest exclusively in securities of NPOs
listed or registered on SSE (i.e. SIF-SSE)

Proposal

6.3.9.3. Accordingly, it is proposed to amend the AIF Regulations to specify

that the minimum investment by an individual in an SIF which is
launched specifically to invest only in securities of NPOs registered or
listed on SSE may be INR 2 Lakh as against the current requirement
of INR 1 Crore.

6.3.10. Minimum grant to be received by SIFs

6.3.10.1. In terms of Regulation 16(4)(b) of the AIF Regulations, SVFs may
accept grants, subject to such grant being at least INR 25 Lakh. From
industry feedback, it is felt that a lower threshold for minimum amount
of grant may generate more interest among potential donors to extend

Page 16 of 26
 grants to SIFs. AIPAC recommended reducing the minimum amount
of grant that may be accepted by a SIF from the existing INR 25 Lakh
to an appropriate lesser amount.

Proposal

6.3.10.2. Accordingly, it is proposed to amend Regulation 16(4)(b) of AIF

Regulations to specify that the minimum grant that may be received by
an SIF shall be INR 10 Lakh from the existing INR 25 lakhs.

6.4. Mutual Funds

6.4.1. Recommendation as approved by the Board

6.4.1.1. Donation to NPOs through Mutual Fund scheme through the following
means:
i. Existing AMCs can collaborate with credible NPOs for
donation of returns on investment made by scheme holders.
ii. Existing AMCs can collaborate with an intermediary in
determining credible NPOs for donation of redemption
amount from units.
6.4.1.2. SEBI to sensitize AMFI to increase awareness.
6.4.2. Vide circular dated October 04, 2021 SEBI has mandated that upon
redemption, funds should directly be credited to the investors registered bank
account. Thus, donation through MF schemes is currently not possible.
Proposal

6.4.3. Once necessary amendments are carried out in ICDR Regulations,

introduction of new category of scheme and necessary disclosures to be
made in Scheme Information Document (SID) may be specified after due
deliberations.
6.5. Fund raising instruments for FPEs

6.5.1. Recommendation as approved by the Board

Page 17 of 26
 “The existing fund raising structures as available for corporates would also
be available for FPEs such as equity, debt, AIFs, etc.”

6.6. Based on deliberations held within the task force, it was felt that an option may be
provided in the regulations so to allow SEBI to introduce other means to raise
funds, in due course, based on requirements of the sector.

6.7. Proposals

6.7.1. ICDR Regulations may be amended to clearly state the following:

For profit social enterprise may raise funds on SSE through

i. Equity (under the Main Board, SME Platform or IGP platform) or equity
issued to an Alternative Investment Fund – Social Impact Fund
ii. Debt
iii. Any other means as specified by SEBI

6.7.2. An explanation may also be provided in respect of FPEs that Securities

issued by FPEs shall list and trade under the respective segment of the Stock
Exchange with an identifier stating that the scrip is a for-profit social
enterprise. FPEs will have to meet eligibility criteria for Main Board, SME
Platform or IGP platform, as applicable, in addition to criteria to identify an
enterprise as social enterprise.

7. Disclosure requirements

7.1. Recommendation as approved by the board

7.1.1. Initial disclosure requirements for various modes of fund raising by NPOs
shall include disclosure of aspects called “differentiators”, as highlighted in the
TG report. The differentiators cover aspects such as vision, target segment,
strategy, governance, management, operations, finance, compliance,
credibility, social impact and risks. It is proposed that suitable amendments
may be made to SEBI Regulations including ICDR Regulations, MF
Regulations and AIF Regulations, in this regard
Page 18 of 26
 7.1.2. Continuous disclosure requirements

7.1.2.1. SSEs shall disclose Social Impact report (Annual Impact Report/
AIR) on annual basis covering aspects such as strategic intent and
planning, approach, impact score card, etc.
7.1.2.2. NPOs on SSE (either registered or listed) will have to disclose
general, governance and financial aspects on an annual basis. The
disclosures will include vision, mission, activities, scale of operations,
board and management, related party transactions, remuneration
policies, stakeholder grievance redressal, balance sheet, income
statement, program-wise fund utilization for the year, auditors report, etc.
NPOs shall be required to comply with Ind AS.
7.1.2.3. SEBI may request ICAI to update its Technical Guide on Accounting
for NPOs issued earlier in 2009.
7.1.2.4. Apart from the annual disclosures, the NPO shall report within 7 days
any event that might have a material impact on the planned achievement
of their outputs or outcomes, to the exchange in which they are
registered/listed. This disclosure will include details of the event, the
potential impact and what the NPO is doing to overcome the impact.
7.1.2.5. FPE listing equity/debt shall, in addition to social impart reporting
requirement, comply with the disclosure requirements as per the
applicable segment such as main board, SME, IGP, etc.
7.1.2.6. SEBI may suitably amend LODR Regulations, AIF Regulations and
MF Regulations to enforce reporting requirements

7.2. Based on deliberations held within the task force, it was desired that initial
disclosure requirements for fund raising through ZCZP and continual disclosure
requirement may be mandated through amendments in ICDR Regulations and
LODR Regulations. The exact requirements for disclosures may be specified
through Circular(s).

7.3. Proposals:

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 7.3.1. ICDR Regulations may be amended to specify that the Board shall specify,
from time to time, minimum disclosure requirements in case of issuance of
ZCZP.
7.3.2. LODR Regulations may be amended to specify that the Board shall specify,
from time to time, continuous disclosure requirements. Amendment to LODR
Regulations is placed at Annex IV.
7.3.3. LODR Regulations may also be amended to mandate Annual Impact Report
to be submitted by Social Enterprise shall be audited by a Social Audit Firm
employing Social Auditor.

8. Other Proposal:

8.1. Since SSE is a novel concept, it would be desirable that an advisory committee
be constituted within SEBI to advise on matters related to fund raising for Social
Enterprises. The advisory committee may comprise of representatives from Social
Stock Exchanges, NABARD, SIDBI, eminent philanthropic organizations,
representatives from social sector, etc.

9. The Board is requested to consider and approve the proposal at para 3.3, 4.2, 5.3,
6.1.3, 6.2.2, 6.3.424, 6.3.5.3, 6.3.5.4, 6.3.6.3 to 6.3.6.4, 6.3.7.2 to 6.3.7.3, 6.3.8.2 to
6.3.8.6, 6.3.9.3, 6.3.10.2, 6.4.3, 6.7, 7.3 and 8 above, approve the amendments to
SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 (Annexure
III), SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015
(Annexure IV), SEBI (Alternative Investment Funds) Regulations, 2012 (Annexure V)
and authorize the Chairman to take consequential and incidental steps to give effect
to the decisions of the Board.

Date: February 10, 2022 Jeevan Sonparote

Place: Mumbai Chief General Manager

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 Annexure I
(Board Agenda for meeting held on September 28, 2021 has been uploaded on SEBI
website)

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 Annexure II
Eligibility Criteria for Social Enterprises (SEs)

1) As recommended by the expert groups, a SE on the SSE, shall demonstrate that

social intent and impact are its primary goals and that such intent is demonstrated
through its focus on eligible social objectives for the underserved or less privileged
populations or regions and thus primacy of its objectives to serve social good.

2) In this regard, the expert groups have recommended a combination of the following
three criteria to establish the primacy of social impact objective of the social enterprise
(SE):
a. 15 broad eligible activities based on Schedule VII of the Companies Act, 2013,
Sustainable Development Goals and priority areas identified by Niti Aayog. The
list of eligible activities is as follows:
i. Eradicating hunger, poverty malnutrition and inequality; promoting health
care (including mental health) and sanitation; and making available safe
drinking water
ii. Promoting education, employability and livelihoods
iii. Promoting gender equality, empowerment of women and LGBTQIA+
communities
iv. Ensuring environmental sustainability, addressing climate change
(mitigation and adaptation), forest and wildlife conservation
v. Protection of national heritage, art and culture
vi. Training to promote rural sports, nationally recognised sports, Paralympic
sports and Olympic sports
vii. Supporting incubators of social enterprises
viii. Supporting other platforms that strengthen the non-profit ecosystem in
fundraising and capacity building
ix. Promoting livelihoods for rural and urban poor, including enhancing income
of small and marginal farmers and workers in the non-farm sector
x. Slum area development, affordable housing, and other interventions to build
sustainable and resilient cities

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 xi. Disaster management, including relief, rehabilitation and reconstruction
activities
xii. Promotion of financial inclusion
xiii. Facilitating access to land and property assets for disadvantaged
communities
xiv. Bridging the digital divide in internet and mobile phone access, addressing
issues of misinformation and data protection
xv. Promoting welfare of migrants and displaced persons

b. SEs shall target underserved or less privileged population segments or regions

recording lower performance in the development priorities of national/state
governments

c. SEs shall have at least 67% of its activities qualifying as eligible activities to the
target population, to be established through one or more of a. Revenue, b.
Expenditure, c. Customer base

3) Corporate foundations, political or religious organizations/ activities, professional or

trade associations, infrastructure and housing companies (except affordable housing)
shall not be permitted as eligible SEs on SSE.

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 Annexure III
(This shall be notified at a later date)

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 Annexure IV
(This shall be notified at a later date)

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 Annexure V
(This shall be notified at a later date)

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