Thursday, September 21, 2023

Non-profit organizations that want to be on the list are not allowed to undergo ongoing IT examination: SEBI

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Market Regulator SEBIA has said that any non-profit organization (NPO), to be listed, must be registered as a non-profit organization and the registration certificate must be valid for 12 months. There should also be no ongoing investigation or notification by the Income Tax Department.

The SEBI on Monday proposed a new framework for the Social Stock Exchange (SSE). This new framework would allow for the inclusion of non-profit organizations (NPOs).

The company must be registered in India as a “charitable trust registered under the statute of the public trust of the relevant state” or under the Societies Registration Act, 1860, or the Indian Trusts Act, 1882, or incorporated as a corporation under section 8 of the Companies Act, 2013. The minimum age for the NPO should be three years, Angel One said in a note.

The NPO must indicate whether it is state or privately owned. Any NPO entity that wants to be on the list must have an 80G registration under the Income Tax Act. Each entity must have a minimum spending of Rs 50 lakh in the past fiscal year and a minimum financing of Rs 10 lakh in the past fiscal year.

The primary goal of the NPOs seeking to be on the list should be social intent and impact. These intentions should focus on different social objectives for unmanaged and underprivileged populations or regions.

The NPO should be involved in 16 broad social activities that have been listed by the board. Eligible activities include eradicating hunger, poverty, malnutrition and inequality, promoting health care, supporting education, employability and livelihoods, empowering women and LGBTQIA communities on gender equality, and supporting breeding grounds for social enterprises.

The NGO sector in India is quite large. There are over 31 lakh NPOs which equate to one NPO per 400 Indians. This new framework proposed by SEBI will certainly help these NPOs take an advanced route for the betterment of the people, Angel One said.

To sum up, SEBI said, “The SSE led by the SSE Governing Council (SGC) will mandate the structure of the Draft Fundraising Document/Final Fundraising Document. The SSE will host such requirements on its website.”

SSE was founded with the intention of providing social enterprises with an additional opportunity to raise money. This new concept was developed with the sole purpose of serving the private and non-profit sectors by directing more capital to them.

The information that SSE needs to collect is the NPO’s vision, strategy, key management personnel data, financial statements from the past three years, and the risks the NPO sees to its work.

“The SSEs will focus on unlocking large pools of social capital and encouraging mixed financing structures so that conventional capital can partner with social capital to address the pressing challenges of Covid-19,” SEBI said.

A working group was set up in 2019, chaired by Ishaat Hussain (ex-director Tata Sons). This working group consisted of representatives of social security, social impact investing, representatives of the Ministry of Finance, the stock exchanges and NGOs.


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