Social Sector Hotline: Social Stock Exchange Rebooted: What SEBI’s Reforms Mean for You

Social Stock Exchange Rebooted: What SEBI’s Reforms Mean for You

• More entities eligible: Wider range of trusts, societies, and legacy section 25 companies can now register as NPOs.
• Sharper oversight of impact reporting: Listed projects must get impact reports vetted by accredited organisations, while smaller NPOs can self-report.
• Time-bound registration: NPOs must raise funds within two years of SSE registration, or risk losing their status.
• Simpler compliance cycle: Annual disclosures split into financial and non-financial, easing timelines and reducing burden

INTRODUTION

The Securities and Exchange Board of India (“SEBI”) has amended the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“LODR Regulations”)¹, the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 (“ICDR Regulations”)², and has amended the SEBI circular dated September 19, 2022³ with respect to the Social Stock Exchange platform by issuing circular dated September 19, 2025 (“Circular 2025”)⁴.

Amended regulations are based on the recommendations outlined in SEBI’s Consultation Paper on “Review of Framework for Social Stock Exchange” (“Consultation Paper”)⁵ released on January 20, 2025, The recommendations were further deliberated by the Social Stock Exchange Advisory Committee (“SSEAC”) and ultimately approved by SEBI Board at its meeting on June 18, 2025 (“Board meeting”)⁶.In this hotline, we analyse the the key changes introduced to the regulatory framework for the Social Stock Exchange.

Key changes

Expanding list of legal structures permissible to be recognized as Not for Profit Organization (“NPO”)

Regulation 292A(e) of the ICDR Regulations states that NPO means a social enterprise which is registered as charitable trust registered under the Indian Trusts Act, 1882 or under the public trust statue of the relevant state, or a charitable society registered under the Societies Registration Act, 1860 or a Company incorporated under Section 8 of the Companies Act, 2013. Regulation 292A(e) of the ICDR Regulation has been amended to include the following:

a) Trusts registered under Indian Registration Act, 1908 with relevant sub-registrar (in states that do not have a dedicated Trusts Act)- This amendment is clarificatory in nature, as several states do not have their own Public Trusts Act. Accordingly, in practice, such trusts have been registered under the Indian Registration Act, 1908 with the relevant sub-registrar.

b) Charitable society registered under the society registration statute of the relevant state. – The Societies Registration Act, 1860 (“Society Act”) allows for the registration and regulation of societies formed for literary, scientific, or charitable purposes. Many states have their own society registration acts which differ from the Society Act. The amendment allows the societies registered under state specific act also be eligible as NPO.

c) Companies registered under erstwhile Section 25 of the Companies Act, 1956 – Section 25 companies under the Companies Act, 1956 (“CA, 1956”) were the predecessors to section 8 companies under the Companies Act, 2013 (“CA, 2013”). While it was generally assumed that such entities would be recognized as NPOs, the ICDR Regulations referred only to section 8 companies, which created ambiguity. Moreover, section 25 companies were not required to re-register under the CA, 2013. The amendment is therefore clarificatory in nature, expressly including section 25 companies within the definition of NPOs, and removes any interpretational doubt by aligning the legislative text with existing practice.

Substitute the term “Social Impact Assessment Firm” (“SIAF”) with “Social Impact Assessment Organization”(“SIAO”) and to allow SIAO to get empanel

Regulation 292A(g) of the ICDR Regulations defined a “Social Impact Assessment Firm” as any entity which employed Social Impact Assessor(s) and had a minimum track record of three years in conducting social impact assessments.

The language suggested that only for-profit or traditional audit type firms were eligible to be empanelled. This formulation was unlikely to attract not-for-profit organisations and institutions from the development sector that could otherwise participate as assessors. Moreover, there is currently a shortage of SIAOs with the prescribed three-year track record — with each of the three recognised Self-Regulatory Organisations (“SROs”) having less than half a dozen eligible organisations.

Accordingly, term “firm” has been substituted with “organization”. By adopting the broader term “organization”, SEBI seeks to encourage participation from a wider set of entities, ensure continuity and accountability (by requiring at least two qualified full-time assessors within each SIAO), and enhance the reliability and credibility of impact assessment on the Social Stock Exchange. Thus, a Social Impact Assessment Organization is required to:-

• employ Social Impact Assessors with at least three years’ experience, and
• have at least two full-time Social Impact Assessors, each with a minimum of three years’ experience, who must sign the impact assessment report.

Such SIAOs are required to be empanelled with SROs such as Institute of Chartered Accountants of India (“ICAI”), Institute of Company Secretaries of India (“ICSI”) or Institute of Cost Accountants of India (“ICMAI”).

Limiting tenure of registration of NPOs with Social Stock Exchange (“SSE”)

Regulation 292F of the ICDR Regulations required NPOs to obtain registration before raising funds through an SSE. However, an NPO could remain registered indefinitely without raising any funds. There was no sunset provision or expiry for such registration. The original intent behind permitting registration without immediate fundraising was to create a pool of NPOs that could familiarize themselves with the SSE framework and subsequently list projects. However, most registered NPOs did not proceed to fundraising, resulting in an inflated registry of inactive entities. As of December 31, 2024, 111 NPOs were registered on the NSE-SSE, but not many have raised funds.

The amended framework provides that registration of an NPO will lapse if it does not raise funds within two years from the date of registration (or such period as SEBI may specify). Upon expiry of this period, the NPO must have at least one listed project for which funds have been raised; failing which, its registration will cease. By imposing a two-year limit, SEBI ensures that only active and committed NPOs remain registered, thereby enhancing the integrity and credibility of the SSE framework.

Modifications to eligible activities for recognition as a Social Enterprise

Regulation 292E(2)(a) of the ICDR Regulations required a Social Enterprise to undertake at least one of the activities enumerated therein in order to establish the primacy of its social intent. The activities included eradicating hunger, promoting education, ensuring environmental sustainability, protecting national heritage, and supporting sports, among others. However, the list was narrow, created overlaps, and left gaps — for example, “education” was referred to without mention of vocational skills, “livelihood” was repeated in multiple places, and environmental activities did not explicitly cover natural ecosystems, pollution control, sustainable lifestyles, or welfare of vulnerable animals, “national heritage” ignored contemporary and local heritage forms, while limiting sports to “training” excluded other support measures such as infrastructure and inclusion programmes.

The amended framework has expanded the list of eligible activities by expressly incorporating the activities set out under Schedule VII of the Companies Act, 2013 (the CSR framework), in addition to the activities already prescribed. The amendment aims to broader and harmonised with the government’s CSR policy priorities.

Modification to applicability of 67% threshold for eligible activities

Regulation 292E(2)(c) of the ICDR Regulations required a Social Enterprise to demonstrate that at least 67% of its activities were devoted to eligible activities for the target population. This was to be established through a three-year average of either: (i) revenues, (ii) expenditures, or (iii) customer/beneficiary base. The formulation applied uniformly to both NPOs and for-profit social enterprises.

The Consultation Paper proposed applying this 67% test specifically to entities (NPOs or for-profit) with more than 20% of revenue from business income, to ensure primacy of social intent. However, this proposal was not carried forward. The rationale, as per the Consultation Paper, was that tax exemptions under the Income Tax Act, 1961 (such as under sections 12A/12AB/10(23C)) already serve as the similar objectives for ensuring that the NPO is primarily established for undertaking charitable activities, and with social intent, and that introducing a business-income based 67% test would help filter out entities pursuing primarily commercial objectives. However, SEBI chose not to adopt business income test criteria.

Instead, SEBI amended the language in regulation 292E(2)(c) to replace “Social Enterprise” with “For-Profit Social Enterprise.” The threshold to demonstrate that 67% of activities are devoted to eligible activities now applies only to For-Profit enterprise. For-profit enterprise is defined as companies or bodies corporate operating for profit, but excluding section 8 companies. The amended regulation is relief to NPO who no longer have to demonstrate that 67% of its activities are devoted to eligible activities. 

Bifurcation of annual disclosures into financial and non-financial aspects

Regulation 91C of the LODR Regulations required NPOs registered on the SSE to submit annual disclosures (governance, financial, programme expenditure) within 60 days of financial year end. However, this timeline was often difficult for NPOs to comply with, given that audits are typically completed closer to the October 31 income tax return filing deadline. More than 50% of NPOs operate in rural or remote areas, and their audits are typically conducted only after completion of corporate audits, closer to the October 31 filing deadline. Requiring disclosures within 60 days created significant compliance challenges. Instead the amended framework bifurcates annual disclosures into:

• Non-financial disclosures (general and governance aspects not dependent on audited accounts) to be filed within 60 days of year end, and
• Financial disclosures (audited statements, tax return details, programme-wise utilisation, etc.) to be filed by October 31 or the income tax return filing deadline, whichever is later.

This staggered approach aligns disclosure timelines with existing statutory audit and tax compliance requirements. SEBI has eased compliance, reduced duplication, and ensured that financial information is reported in sync with statutory audit cycles.

Segregation of Annual Impact Report (AIR) between listed and non-listed projects

Regulation 91E of the LODR Regulations required all Social Enterprises registered with or raising funds through the SSE to submit an Annual Impact Report (“AIR”). The framework did not distinguish between listed projects (for which funds were raised through SSE instruments) and other significant non -listed projects of NPO. Further, the AIR was required to be audited by “social auditors,” placing a uniform compliance burden across entities, irrespective of whether funds had been mobilised through the SSE. Uniform AIR requirements imposed disproportionate costs on smaller NPOs without SSE fundraising. Field-based assessments are resource-intensive and burdensome

The amendments now differentiate AIR requirements as follows:

• Listed projects / entities that have raised funds through SSE: The AIR must be assessed by empanelled Social Impact Assessment Organizations (SIAOs). Further, Circular 2025 mandate Social Enterprises to file their AIR by October 31 of each year or before the due date for filing the income tax return under the Income-tax Act, 1961, whichever is later.
• Significant Non-listed projects: These entities may file a self-reported AIR. Provided social impact reporting for both listed projects and non-listed significant project shall cover at least 67% of the NPO’s programme expenditure for the previous financial year.
•  NPOs that are registered on the SSE but have not raised funds through it: – NPO registered on an SSE but not raising funds may submit a self-certified AIR. However, such registration is valid only for a maximum period of two years. On expiry of this period, the NPO must have at least one listed project for which funds are raised through the SSE; otherwise, its registration shall lapse. The Circular 2025 further requires such AIRs to (i) cover the NPO’s significant activities, programmes or projects, (ii) explain the methodology for determining significance, and (iii) treat any activity covered under a listed security as significant activity.

Conclusion

The amended framework appears to meaningfully ease regulatory hurdles for the effective functioning of the SSE, while simultaneously encouraging broader participation from market players by expanding the definition of eligible NPO(s). By removing the requirement for NPOs to demonstrate that 67% of their activities are devoted to eligible activities, the amendment further alleviates unnecessary compliance burden and aligns with existing regulatory and tax safeguards that already ensure social intent. In addition, by streamlining compliance requirements only with respect to listed projects and reducing associated costs, particularly for smaller entities, the amendment represents a constructive policy intervention. Taken as a whole, it signals a positive shift towards fostering a more inclusive, efficient, and sustainable ecosystem for social enterprises.

Authors

Harit Gandhi, Sehar Sharma and Rahul Rishi

You can direct your queries or comments to the relevant member.

¹https://www.sebi.gov.in/legal/regulations/sep-2025/securities-and-exchange-board-of-india-listing-obligations-and-disclosure-requirements-regulations-2015-last-amended-on-september-08-2025-_96749.html

²https://www.sebi.gov.in/legal/regulations/sep-2025/securities-and-exchange-board-of-india-issue-of-capital-and-disclosure-requirements-regulations-2018-last-amended-on-september-09-2025-_96753.html

³https://www.sebi.gov.in/legal/circulars/sep-2022/framework-on-social-stock-exchange_63053.html

⁴https://www.sebi.gov.in/legal/circulars/sep-2025/framework-on-social-stock-exchange_96702.html

⁵https://www.sebi.gov.in/reports-and-statistics/reports/jan-2025/consultation-paper-on-review-of-framework-for-social-stock-exchange_91022.html

⁶https://www.sebi.gov.in/media-and-notifications/press-releases/jun-2025/sebi-board-meeting_94657.html

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