The Securities and Exchange Board India (Sebi) has proposed to reduce the minimum issue size for non-profit organisations (NPOs) on social stock exchanges (SSEs) by 50%, and application size by 95% to facilitate more fundraising.
A consultation paper issued on Tuesday stated that both the NSE and BSE have set up the SSE segment, and 31 NPOs were registered in this segment across both exchanges, as of August 23. An NPO is required to be registered with the SSE to raise funds.
This is because the SSE concept is at an initial stage and NPOs may find it difficult to raise Rs 1 crore from a limited set of investors, says the regulator. In addition, investors are not sufficiently aware of the SSE framework. Consequently, it may not be easy for such NPOs to find investors to raise the stipulated Rs 1 crore. Further, the minimum fund flow requirements for the past financial year of the NPO on the SSE has been fixed at Rs 50 lakh (for annual spending) and Rs 10 lakh (for funding), stated the paper.
As regards the minimum application size for public issue of a ZCZP, it has been proposed to reduce the present Rs 2 lakh threshold to Rs 10,000. Lowering the same could help a large number of investors who may like to subscribe to ZCZP of more NPOs, says the paper. Besides, Rs 2 lakh is deemed too large for those donating on a regular basis.
Among other proposals is to exempt educational institutes from registration under Section 80G of the Income Tax Act, 1961, given that these entities use their income solely for educational purposes and not for profit, similar to charitable institutions. Further, the term ‘social auditor’ will be replaced by ‘Social Impact Assessor’ as the term ‘audit’ has a negative connotation.
The format and detail of past social impact to be provided by NPOs can be based on past practice of the NPOs, as restating the past social impact assessment into a format prescribed by Sebi would be a costly and time-consuming exercise for NPOs, it said.
Sebi has sought comments on the proposals by September 19.