Social Stock Exchange- A Good Initiative

Abstract

The Hon’ble Finance Minister, in her July 2019 Budget speech, announced that India would soon have a social stock exchange (SSE). The proposed exchange would follow SEBI regulation and allow listing of social enterprises and voluntary organisations. In September 2019 SEBI, the capital market regulator, has constituted a working group to study and recommend a framework for the launch of an SSE in India. The concept of a social stock exchange is innovative, but not new. SSEs operate in some form in countries like Canada, UK, Singapore, and Kenya. The formats may vary. For example, the Social Stock Exchange in the UK, which was set up in 2013, functions as a platform connecting social enterprises and potential investors. On the other hand, the SVX, an online impact investing platform, set up by the Ontario government in Canada about ten years ago is aimed for ventures, funds and investors seeking social and/or environmental impact alongside the potential for financial return. Social enterprise is not defined in the Indian Companies Act, 2013. Section 8 of the Companies Act defines a non-profit company as one established for promoting commerce, art, science, religion, charity or any other useful object, provided the profits, if any, or other income is applied for promoting only the objects of the Company and no dividend is paid to its members. Social enterprises are defined by the UK government as “a business with primarily social objectives whose surpluses are principally reinvested for that purpose in the business or in the community, rather than being driven by the need to maximise profit for shareholders and owners."1 Nobel Laureate Yunus has preferred to use the expression social business2 and defined it as a business to address one or more social problems and is run as a non-loss and non-dividend company. The majority of social enterprises in India are incorporated either as a section 8 (earlier section 25) company or a charitable trust. However, law does not preclude formation of for-profit entities with social purpose. In that sense, a social enterprise should be distinguished from non-profit organisations (NPO). All NPOs are social enterprises, but the reverse is not necessarily true.