Social Stock Exchange and Its Role in Regulating Social Enterprises.
The Social Stock Exchange represents a framework for sales in which nonprofit companies as well as groups that produce a beneficial effect on society and the environment may raise funds via the offering of investments. Its objective is to link those with an interest in promoting environmentally ethical endeavors to such impact-minded companies. The SSE operates in a controlled and open trading environment that allows traders to purchase and trade instruments produced by nonprofit organisations while encouraging the movement of funds toward companies and initiatives that serve a charitable or environmental objective. The SSE usually functions according to the dual goals of attaining a monetary return and having quantifiable effects on society.
During her speech on the budget for the financial year 2019-2020, the dignified Minister of Finance, Smt. Nirmala Sitharaman suggested the creation of an online fundraising site called the “Social Stock Exchange.” The system would function within the regulatory purview of the Securities and Exchange Board, allowing social enterprises to be listed as well as nonprofit organizations working to accomplish socially beneficial aims. They’d be able to obtain financing via equity, loans, or shares, which is comparable to mutual funds.
The Social Stock Exchange section of the National Stock Exchange (NSE) provides a unique chance for social companies, such as non-governmental organizations carrying out eligible tasks, to apply for funding and register on an approved exchange platform.
A social company, which may be a not-for-profit organization (NPO) or a For-Profit Social Enterprise (FPE), has to meet the requirements as determined by SEBI periodically. Businesses that satisfy the requirements will have the ability to sign up and list their tools on the website.
The rules for raising funds on the SSE for social enterprises are the same as for listed non-profit entities in regular stock exchanges. Listed non-profits, to begin with, will raise funds through zero coupons zero principal (ZCZP) bonds, which is essentially a donation certificate. It is meant for investors looking to create social impact without seeking financial returns. The minimum issue size is Rs 1 crore and the minimum application size is Rs 2 lakh. These bonds can be issued for specific projects only and diversification is not supported.
A fundamental, low-level reality is that ordinary individuals rarely make contributions to nonprofit organizations. The reason for this is the absence of trust-related variables as well as the visibility of the company. It’s difficult to determine the true operation of non-governmental organizations, how they actually spend money, and how they are implemented. The idea of SSE is going to certainly contribute to our success as a team. The Social Stock Exchange is going to be an innovative means of raising money to support social businesses.
The impact of the Social Stock Exchange will be expanded to include large populations, covering whole states and nations as well. When the Social Stock Exchange becomes a stock exchange member, it will become accessible to everyone in the world. In this manner, there will be constant resources available in the marketplace with evidence of payments to nonprofit organizations. For both institutions and individuals, when they make donations to a charitable organization, there is a significant likelihood of black money discharge. Because of a lack of laws in the past, numerous NGOs were additionally linked to corruption schemes through the receipt of black money.
Thus, SSE will enable social enterprises to raise funds from the public, enhancing their visibility and fostering transparency in fund mobilization and utilization. Additionally, the SSE will increase the visibility of social enterprises, attracting both retail and institutional investors interested in supporting socially impactful ventures.
Need to learn more please drop us a line at info@cs-india.com