Sebi allows more charity entities to raise money through social stock exchange

Markets Regulator Sebi allowed more charity institutions to raise money through the Social Stock Exchange (SSE) on Friday, in an attempt to broaden access to the platform.

In his newest circular, the regulator qualified for the definition of non-profit organizations (NPOs) to mention on the SSE.

Among the extensive framework, legal structures such as Trusts registered under the Indian Registration Act, 1908, charity organizations will be registered under the relevant State Registration Act of the State and companies registered on the basis of section 25 of the Law of the former companies, 1956, will now fall within the definition of NPOs.

To guarantee the accountability, Sebi has also described the reporting requirements for such entities.

In cases where an NPO is registered without mentioning any security, the annual impact report (AIR) must be self -reported. This report should emphasize the important activities, interventions, programs or projects of the NPO during the year, together with an explanation of the methodology used to determine their meaning.

Furthermore, Sebi clarified that if an activity, intervention, program or project is linked to a stated security, it is automatically eligible as an important initiative. In such cases, the air is required to cover at least 67 percent of the programs made in the previous financial year. The regulator also has split annual disclosure requirements in financial and non-financial matters, where individual timelines for each prescribe. Publication of general and administrative aspects must be made within 60 days of the end of the financial year, while disclosures with regard to financial aspects must be submitted on 31 October of each year or before the due date of submitting income tax returns, depending on what is later.

SEBI has further enabled the SSE to specify extra disclosure parameters that NPOs may need to provide annually.

In addition, all social companies that collect its funds through SSE must submit a air -rated air to the same deadline of 31 October or by the expiration date of the income tax return. The air will also have to be assessed by social impact reassessors, with their reports that have been announced in addition to their own air of the NPO.

This step follows the recent changes of Sebi in the ICDR (publication of capital and disclosure requirements) and LODR (list obligations and disclosure requirements) standards.

Earlier this month, the Regulator replaced the term “Social Impact Assessment Firm” by “Social Impact Assessment Organization (Siao)”, which indicates a more professional-agent approach for such organizations.

Such organizations must have at least two social impact assessors in full-time employment for performing social impact assessment.

Such impact rating agencies must have experience with at least 3 years in performing social impact assessment.

These social impact assessors would be instructed to sign the Impact Assessment Report if the SIAO does not have a three-year track record for performing social impact assessment.

The changes also require that social companies raise money through the social exhibition mechanism within a period of two years after its registration on such an exchange, which means that registration will be canceled.