Sebi Proposes Broader Definitions for NPOs and Expands Activities Under Social Enterprise Framework

The Securities and Exchange Board of India (Sebi) has suggested expanding the definition of Not-for-Profit Organizations (NPOs). This includes adding activities like supporting disadvantaged groups and promoting arts and culture as social enterprises. Sebi also proposed allowing NPOs to register on the Social Stock Exchange (SSE) for up to two years without needing to raise funds.

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Many NPOs register with the SSE but do not proceed to listing or renew their registration due to the costs involved, such as annual reporting and social impact assessments. Sebi's consultation paper highlights these issues. The regulator aims to improve clarity, expand eligibility, and enhance transparency within the SSE framework through these proposed changes.

Proposed Changes in Social Stock Exchange Framework

The Social Stock Exchange Advisory Committee (SSEAC) has recommended several changes. These include broadening the list of legal structures recognized as NPOs to include Trusts, Charitable Societies, and Companies. The committee also suggests expanding eligible activities under the SSE framework to make it more inclusive.

Key proposals involve adding welfare for disadvantaged groups, vocational skills training, environmental stewardship, and promoting arts, culture, and heritage. The scope for sports is expanded to focus on promotion rather than training. Research and development in fields like science and medicine, funded by public entities, are also included.

Enhancing Social Impact Assessment

Sebi proposes replacing "Social Impact Assessment Firm" with "Social Impact Assessment Organization." These organizations must have at least two full-time assessors with a minimum of three years' experience in social impact assessment. They should be empanelled by self-regulatory organizations like ICAI, ICSI, or ICMAI.

These organizations may employ or engage assessors long-term, emphasizing their expertise and competence. The committee also suggests separating annual disclosures into financial and non-financial aspects with revised timelines. Separate impact reports for listed and significant non-listed projects are recommended.

Improving Governance and Reporting

The proposals include adding tax registration details for NPOs in initial disclosures. Governance and remuneration information should also be disclosed. Annual reports should include governance and financial details, using a logic model for impact reports. Updating governance body details in the reporting annexure is also suggested.

Feedback on these proposed changes is sought until February 10. The SSE framework was first introduced in 2022, covering capital issuance, disclosure, and alternative investment funds. As of December 31, 2024, a total of 111 NPOs are registered on the SSE segment of both NSE-SSE and BSE-SSE.

Additionally, 10 NPOs have raised Rs 22 crore through SSE by issuing Zero Coupon Zero Principal instruments. These efforts aim to make the SSE framework more inclusive and aligned with regulatory intent.