Disclaimer

This website is only for informational purposes. Visitors are requested to note that the information is intended to be correct, complete, and up-to-date. Juris Corp does not warrant that the information contained on this website is accurate or complete, and disclaims any and all liability to any person for any loss or damage caused by errors or omissions, whether such errors or omissions result from negligence, accident or any other cause.

This website is not intended to be a source of advertising or solicitation. The reader must not consider the information contained herein to be an invitation for a lawyer-client relationship, must not rely on information provided herein and must seek independent advice. Transmission, receipt or use of any information on this website does not constitute or create a lawyer-client relationship. No recipients of content from this website should act or refrain from acting, based upon any or all of the contents of this website.

Furthermore, Juris Corp does not wish to represent anyone desiring representation based solely upon viewing this web site. Finally, the reader is warned that the use of e-mail for confidential or sensitive information is susceptible to inherent risks of lack of confidentiality associated with sending e-mail over the internet.

By clicking on the "I understand and agree" button below, the user acknowledges that:

  • This website is not a mode of advertisement, promotion, personal communication, or solicitation of any sort whatsoever and the user wishes to gain information about us for his/her own reasons;
  • Entering into this website does not establish a lawyer-client relationship.

We are not liable for any consequence of any action taken by the user relying on information provided under this website. In cases where the user has any legal issues, he/she must seek independent legal advice.

JC - Legal Updates - Framework for Social Stock Exchanges introduced

Legal Updates

03 Aug 2022

Framework for Social Stock Exchanges introduced

A framework for the social stock exchange to provide social enterprises with an additional avenue to raise funds has been recently introduced. An overview of the framework is as follows:

1)       Social Stock Exchange:

Social Stock Exchanges (“SSE”) shall be a separate segment of the existing stock exchanges permitted to register and/or list the securities issued by Not for Profit Organizations (“NPOs”) and For Profit Social Enterprises (“FPOs”), collectively called Social Enterprises (“SEs”).

The SEs shall engage in one of the 16 social activities listed by SEBI.

2)       Raising Funds:

(a)      Eligible NPOs can raise funds through:

(i)       issuance of zero coupon, zero principal instruments;

(ii)      mutual funds; and

(iii)     any other subsequent form as stipulated by SEBI.

(b)      FPOs can raise funds through:

(i)       issuance of equity shares on the main board, SME platform or equity shares issued to an alternative investment fund, including social impact fund;

(ii)      issuance of debt securities; and

(iii)     any other subsequent form as stipulated by SEBI.

NPOs desirous of raising funds on the SSE will be required to be registered with the exchange.

3)       Social Impact Funds:

(a)      Social venture funds under the SEBI AIF Regulations have now been replaced with Social Impact Funds which are Alternative Investment Funds which invest primarily in securities, units or partnership interest of social ventures or securities of SEs and which satisfies the social performance norms laid down by the fund.

(b)      The corpus requirements for such funds have been reduced from INR 20 crores to INR 5 crores.

(c)      The minimum value of the investment by an individual investor shall be INR 2 lakhs in case of a social impact fund which invests only in securities of NPOs registered or listed on SSEs.

(d)      The amount of grant that may be accepted by such funds from any person has been reduced to ₹10 lakh from ₹25 lakh.

(e)      The social impact fund or schemes of a social impact fund launched exclusively for an NPO registered or listed on an SSE shall be permitted to deploy or invest 100 per cent of the investable funds in the securities of NPOS registered or listed on an SSE.

To give effect to the above framework, the Securities and Exchange Board of India (“SEBI”) has amended the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018, SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 and the SEBI (Alternative Investment Funds) Regulations, 2012 on 25th July 2022.

https://www.sebi.gov.in/legal/regulations/jul-2022/securities-and-exchange-board-of-india-issue-of-capital-and-disclosure-requirements-third-amendment-regulations-2022_61171.html

https://www.sebi.gov.in/legal/regulations/jul-2022/securities-and-exchange-board-of-india-listing-obligations-and-disclosure-requirements-fifth-amendment-regulations-2022_61169.html

https://www.sebi.gov.in/legal/regulations/jul-2022/securities-and-exchange-board-of-india-alternative-investment-funds-third-amendment-regulations-2022_61156.html

For any further information, please contact Ms. Apurva Kanvinde (apurva.kanvinde@jclex.com) or Mr. Smit Parekh (smit.parekh@jclex.com).