SEBI Proposes Changes to NPOs and Social Stock Exchange

The Securities and Exchange Board of India (SEBI) has put forward proposals to broaden the definition of Not-for-Profit Organizations (NPOs) and expand eligible activities under the Social Stock Exchange (SSE). These recommendations, outlined in a consultation paper issued on January 20, is to address operational challenges and make the framework more inclusive.

Broader Activities for Social Enterprises

The list of eligible activities has been expanded to include vocational skills training, welfare for disadvantaged groups like children, women, and the elderly, as well as environmental stewardship, and the promotion of arts, culture, and heritage.

Additionally, the welfare of domestic and vulnerable animals, as well as the preservation of heritage in remote locations, has been included. Changes also shift the focus in sports from training to promotion and add research in science and medicine funded by public entities.

New Legal Structures Recognised as NPOs

SEBI has recommended adding more legal structures to qualify as NPOs, such as trusts registered under the Indian Registration Act, 1908, charitable societies under state laws, and companies registered under Section 25 of the Companies Act, 1956. These changes are intended to allow a wider range of organizations to participate in the SSE.

Addressing Cost and Registration Concerns

To tackle cost-related challenges faced by NPOs, SEBI proposes allowing them to register with the SSE for up to two years without raising funds. This acknowledges that many NPOs currently fail to transition to listing due to costs linked to annual reporting and social impact assessments.

Governance and Reporting 

The proposals suggest separating financial and non-financial annual disclosures, including governance and tax details in reports, and requiring separate impact reports for listed and non-listed projects. Social Impact Assessment Firms may also be replaced with Social Impact Assessment Organizations employing experienced assessors.

Current Status

As of December 31, 2024, 111 NPOs are registered with the SSE, and ₹22 crore has been raised by 10 organisations through Zero Coupon Zero Principal instruments. SEBI has invited feedback on the proposals until February 10, 2025.

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