What Is Social Stock Exchange? How Does It Work?

Social Stock Exchange (SSE) is a concept introduced by the government in 2019 to provide a platform for social enterprises and voluntary organisations to raise capital.

It is a platform that allows social enterprises to access capital markets and raise funds from investors who are interested in investing in organisations that have a social impact.

Background

Creation of SSE was proposed by union minister of finance and corporate affairs, Nirmala Sitharaman, while presenting the Union Budget 2019-20.

It was proposed to initiate steps towards creating a social stock exchange, under the regulatory ambit of Securities and Exchange Board of India, for listing social enterprise and voluntary organisations.

The finance minister said that it is time to take capital markets closer to the masses and meet various social welfare objectives related to inclusive growth and financial inclusion.

“I propose to initiate steps towards creating an electronic fund raising platform, a social stock exchange – under the regulatory ambit of Securities and Exchange Board of India (SEBI) for listing social enterprises and voluntary organisations working for the realisation of a social welfare objective so that they can raise capital as equity, debt or as units like a mutual fund,” FM had said.

What is the Social Stock Exchange (SSE)?

SSE is a separate segment of the existing stock exchange that can help social enterprise(s) to raise funds from the public through the stock exchange mechanism.

SSE will act as a medium between social enterprises and fund providers and that can help them to select those entities that are creating measurable social impact and reporting such impact.

Certain type of social enterprises i.e. not-for-profit organisations (NPOs) that meet the registration criteria can register on SSE and undertake to make continuous disclosures on their social impact. Such NPOs may or may not choose to raise funds through SSE, however, would continue to make disclosures including on social impact to stock exchanges.

Sebi has granted approval for introducing SSE as a separate segment on BSE and NSE.

Which entity can identify itself as a social enterprise?

Social Stock Exchange identifies the following two forms of social enterprises that are engaging in the activity of creating positive social impact and that meets the primacy of their social intent.

1. Not-for-profit organisation

2. For profit social enterprise

What is a not-for-profit organisation in the context of the Social Stock Exchange?

A not for profit organisation is an entity which meets the criteria to be identified as a social enterprise and is any of the following entities:

1. A charitable trust registered under the public trust statute of the relevant state;

2. A charitable society registered under the Societies Registration Act, 1860 (21 of 1860);

3. A company incorporated under section 8 of the Companies Act, 2013 (18 of 2013);

4. Any other entity as may be specified by SEBI

Which entity can be identified as a for profit social enterprise in the context of Social Stock Exchange?

A for profit social enterprise is an entity which meets the criteria to be identified as a social enterprise and is any of the following entities:

1. A company under the Companies Act, 2013, operating for profit and does not include a company incorporated under section 8 of the Companies Act, 2013 (18 of 2013);

2. A body corporate operating for profit

Is this meant for Indian entities only or international NPOs can also get registered?

Only Indian entities can register in the Social Stock Exchange.

Will foreign investors like FII’s, FPI’s or NRI investors be allowed to invest in NPOs fund raising?

Foreign investors like FII’s, FPI’s or NRI investors, will not be allowed to invest in NPOs fund raising.

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