Description

SEBI relaxes Social Stock Exchange framework by extending NPO registration validity from two to three years and reducing minimum subscription threshold for Zero Coupon Zero Principal Instruments from 75% to 50% under specified conditions.

Summary

SEBI, in consultation with the Social Stock Exchange Advisory Committee (SSEAC), has amended the SSE framework to promote ease of fund raising and encourage greater participation by Not for Profit Organizations (NPOs). The two key changes are: (1) extension of the permissible period for an NPO to remain registered on the SSE without raising funds from two years to three years, and (2) reduction of the minimum subscription requirement for Zero Coupon Zero Principal (ZCZP) instruments from 75% to 50%, subject to due diligence by the SSE.

Key Points

  • NPOs registered on a Social Stock Exchange may now defer fund raising for up to two years from registration, with an option to extend by one additional year (total three years) subject to SSE approval.
  • Minimum subscription threshold for ZCZP issuances reduced from 75% to 50%, but only where the SSE satisfies itself (through due diligence) that the partial funds raised can be deployed meaningfully in line with the stated social objective.
  • The SSE must conduct due diligence prior to granting in-principle approval for partial fund raising under the 50% threshold.
  • NPOs must disclose in the Fund Raising Document how they will raise the balance capital if subscription is at 75% or 50%, and the potential impact on social objectives if under-subscription is not remedied.
  • Funds must be fully refunded if minimum subscription (whether 75% or 50% as applicable) is not achieved.
  • The circular modifies the Master Circular no. HO/49/14/14(6)2025-CFD-PoD1/I/2771/2026 dated January 19, 2026.

Regulatory Changes

  • Para 1.1.2 (new insertion): Specifies that an NPO may register on the SSE without raising funds for two years from the date of registration; this period may be further extended by one additional year with SSE approval, per Regulation 292F of SEBI ICDR Regulations.
  • Para 1.4.5 (amended): Minimum subscription for ZCZP remains 75% as the base requirement, with a proviso allowing 50% where the SSE confirms via due diligence that partial funds can be deployed in a viable and meaningful manner aligned with the disclosed object of the issue.
  • Para 1.4.6 (amended): Under-subscription disclosure requirements updated to reference both 75% and 50% minimum subscription scenarios.

Compliance Requirements

  • Social Stock Exchanges: Must conduct due diligence before granting in-principle approval for ZCZP issuances seeking the reduced 50% subscription threshold; must assess whether partial funds can be deployed meaningfully considering subscription scenarios in the Fund Raising Document.
  • Not for Profit Organizations: Must disclose in Fund Raising Documents the plan to raise balance capital under 75% or 50% subscription scenarios, and potential social impact of under-subscription.
  • All listed entities/participants: Should note that refund obligations remain in force if minimum subscription thresholds are not met.

Important Dates

  • Circular Date: April 15, 2026
  • Effective Date: Immediate (the circular amends the existing Master Circular dated January 19, 2026 with effect from issuance).

Impact Assessment

This circular has a targeted but meaningful impact on the Social Stock Exchange ecosystem. By extending the no-fund-raising window for registered NPOs to three years, SEBI reduces pressure on organizations that may need more time to prepare for capital markets participation, thereby increasing the pool of registered entities. The reduction in minimum ZCZP subscription from 75% to 50% lowers the barrier to successful fund raising, enabling NPOs to proceed with projects even with partial funding, provided viability is demonstrated. The due diligence requirement placed on SSEs acts as a safeguard against misuse of the relaxed threshold. Overall, these changes are expected to boost activity on the Social Stock Exchange and support the broader goal of channeling capital toward social impact initiatives.

Impact Justification

Affects a niche but growing segment of the market (Social Stock Exchange and NPOs); the changes ease regulatory burden and promote participation, but impact is limited to social enterprises and not the broader equity/debt markets.