3.1 Registration Process for Not-for-Profit Organizations (NPOs)

Two-Stage Pathway: Registration vs. Listing

Under SEBI ICDR Regulation 292F, an NPO can engage with the Social Stock Exchange through two distinct pathways:

1. Registration without Issuing Securities: An NPO registers on the SSE to establish institutional credibility, publicly showcase its governance standards, and enhance visibility for bilateral donor funding without immediately floating an instrument.
2. Registration and Listing of Securities: The NPO registers and subsequently floats an issuance of Zero Coupon Zero Principal (ZCZP) instruments to mobilize capital from the public and institutional funders.

Pathway 1 : NPO Application ---> Eligibility Scrutiny ---> Registered on SSE (Credibility & Visibility)
Pathway 2 : Registered NPO  ---> File Information Memo ---> Issue ZCZP Bonds ---> Listed Security on SSE

Eligibility Criteria for Registration of NPOs on SSE

To ensure that only genuine, well-governed, and operationally mature non-profits enter the capital markets, SEBI and the exchanges (NSE/BSE) enforce rigorous minimum registration thresholds:

+---------------------------------------------------------------------------------------------------+
|                         MANDATORY ELIGIBILITY CRITERIA FOR NPO REGISTRATION                       |
+-------------------+-------------------------------------------------------------------------------+
| Legal Form        | Must be registered as a Charitable Trust, Society, or Section 8 Company       |
+-------------------+-------------------------------------------------------------------------------+
| Operational Age   | Minimum operational track record of at least **three (3) years**              |
+-------------------+-------------------------------------------------------------------------------+
| Tax Registrations | Valid registration under **Section 12A / 12AA / 12AB** of the Income-tax Act; |
|                   | Valid registration under **Section 80G** providing tax deduction to donors    |
+-------------------+-------------------------------------------------------------------------------+
| Minimum Spending  | Minimum annual developmental expenditure of at least **₹50 Lakh** in the      |
|                   | immediately preceding financial year                                          |
+-------------------+-------------------------------------------------------------------------------+
| Minimum Receipts  | Minimum annual receipts (funding/donations) of at least **₹10 Lakh** in the   |
|                   | immediately preceding financial year                                          |
+-------------------+-------------------------------------------------------------------------------+
| Governance & Audit| Must have audited financial statements for preceding 3 years signed by an CA; |
|                   | Valid PAN, NGO Darpan registration ID (NITI Aayog portal), valid FCRA (if any)|
+-------------------+-------------------------------------------------------------------------------+

Mandatory Ineligibility Disqualifications

An NPO is strictly barred from registering on the Social Stock Exchange if:

• Any of its trustees, governing board members, directors, or promoters are convicted of economic offenses or debarred by SEBI, RBI, or any sectoral regulator.
• It is classified as a wilful defaulter or fugitive economic offender.
• Its registration under the Foreign Contribution (Regulation) Act (FCRA) has been suspended or cancelled due to statutory violations.
• It is engaged primarily in religious activities, trade union activities, political advocacy, or commercial fraternal objectives.

3.2 Rights, Obligations, and Information Memorandum Documentation

The Draft Information Memorandum (DIM) / Information Memorandum (IM)

When a registered NPO decides to raise funds by issuing Zero Coupon Zero Principal (ZCZP) instruments, it must prepare and file an official offer document designated as the Draft Information Memorandum (DIM) with the Social Stock Exchange:

+---------------------------------------------------------------------------------------------------+
|                           INFORMATION MEMORANDUM (IM) MANDATORY CONTENTS                          |
+-------------------+-------------------------------------------------------------------------------+
| Entity Overview   | - Legal registration details, history, founding vision, and mission statement |
|                   | - Details of governing board, trustees, senior management, and remuneration   |
+-------------------+-------------------------------------------------------------------------------+
| Track Record      | - Detailed description of past social programs executed over past 3 years      |
|                   | - Quantitative reach, beneficiary numbers, geographic areas covered           |
+-------------------+-------------------------------------------------------------------------------+
| Project Details   | - Stated social problem, proposed intervention, and target geography          |
|                   | - Implementation schedule, milestone roadmap, and target completion timeline  |
+-------------------+-------------------------------------------------------------------------------+
| Financial Plan    | - Total project cost budget broken down by operational line items             |
|                   | - Schedule of fund deployment and escrow bank account mechanism               |
+-------------------+-------------------------------------------------------------------------------+
| Impact Metrics    | - Key Performance Indicators (KPIs) mapped to relevant Social Audit Standards |
|                   | - Baseline study findings and targeted incremental outcome metrics            |
+-------------------+-------------------------------------------------------------------------------+
| Risk Factors      | - Internal and external risks (monsoon dependence, regulatory shifts, staffing)|
+-------------------+-------------------------------------------------------------------------------+

Filing and Public Scrutiny Timeline

1. Filing of DIM: The NPO submits the Draft Information Memorandum along with the non-refundable processing fee to the Social Stock Exchange.
2. Public Comments Period: The DIM is hosted on the websites of the SSE and the NPO for a minimum period of at least 14 calendar days to invite public and investor comments.
3. In-Principle Approval: The SSE reviews the document, verifies eligibility proofs, evaluates public feedback, and issues in-principle listing approval.
4. Final Information Memorandum: Incorporating any modifications mandated by the exchange, the final IM is filed prior to the opening of the issuance.

Rights and Obligations of NPOs and Investors

• NPO Obligations: The NPO must maintain an exclusive escrow bank account for receiving subscription proceeds, ensure funds are spent strictly on the stated project, submit quarterly fund utilization certificates, and undergo mandatory annual social audits.
• Investor Rights: ZCZP holders do not possess voting rights or claim on underlying physical assets of the NPO. However, they hold a statutory legal right to receive transparent disclosures, quarterly progress milestones, and the audited Annual Impact Report.

3.3 Key Listing Guidelines, De-Listing Conditions, and Continuous Compliance

Mechanics of ZCZP Issuance and Minimum Subscription

The process of issuing and listing ZCZP instruments on the SSE follows structured capital market protocols:

Issue Launch ---> Public Subscription Window (Min 3 to Max 30 Days) ---> Demat Credit & Listing
                                                                          |
                    Minimum Subscription Condition:                        |
           Must achieve at least 75% of the target issue size!            |
(If < 75% subscribed: Issue FAILS -> 100% of funds refunded within 5 days)|

• Issue Period: The issue must remain open for subscription for a minimum of 3 working days and not more than 30 working days.
• The 75% Minimum Subscription Rule: Regulation 292K stipulates that the minimum subscription to be received in the issue shall be at least 75% of the issue size. If the NPO fails to achieve 75% subscription, the entire subscription amount received must be refunded to the applicants without interest within 5 working days from the issue closure date.
• Allotment in Demat: Allotted ZCZP securities are credited directly to the investors' demat accounts held with NSDL or CDSL.

Continuous Compliance Obligations under SEBI LODR Chapter IX-A

Once listed, the NPO is subject to ongoing compliance and reporting obligations:

1. Quarterly Statement of Fund Utilization: The NPO must submit a quarterly report to the SSE detailing actual funds deployed versus planned budgets until 100% of proceeds are fully utilized.
2. Annual Financial Statements: Submission of audited balance sheet and income/expenditure accounts within 60 days from the end of the financial year.
3. Annual Impact Report (AIR): Submission of an audited Social Impact Assessment Report prepared by an independent Social Impact Assessor within 90 days of the financial year-end.
4. Material Event Disclosures: Any significant event affecting project implementation (e.g., natural disaster damaging facilities, resignation of key project heads, litigation) must be disclosed to the SSE within 7 days.

De-Listing and Termination Conditions

ZCZP instruments are automatically de-listed from the Social Stock Exchange upon:

• The full completion of the project and submission of the final verified Social Impact Report.
• The exhaustion of the instrument's stated tenure.
• Involuntary de-listing ordered by SEBI or the SSE in the event of persistent compliance defaults, material fraud, or diversion of project funds.