Are You a Trust, NGO, or Section 8 Company? Why Listing on the Social Stock Exchange (SSE) is Your New Fundraising Reality

“Imagine asking your 5,000 Instagram followers to donate ₹1,000 each directly via their Demat accounts (like Zerodha or Groww). This opens up a massive new retail fundraising channel that sits right alongside your corporate CSR pipeline.”

For decades, India’s social sector has relied on a fragmented system of grants, donations, and CSR funds. While these avenues are vital, they often suffer from unpredictability and a lack of standardized impact measurement.

Enter the Social Stock Exchange (SSE)—a revolutionary initiative under the aegis of the Securities and Exchange Board of India (SEBI).

This is not just another compliance hurdle; it is a structural transformation. For legitimate NGOs, Trusts, and Section 8 Companies, the SSE represents a shift from “begging for donations” to “listing for social capital.”

1. What is the SSE? (Technical Overview)

Technically, the SSE is not a separate exchange but a dedicated segment within existing stock exchanges (BSE and NSE). It allows Non-Profit Organizations (NPOs) and For-Profit Social Enterprises (FPSEs) to list on a recognized bourse.

For an NPO, “listing” does not mean selling equity (ownership). You cannot sell shares of a charity. Instead, you list financial instruments that represent social impact rather than financial return.

2. Why List? The Strategic Advantages

Beyond the prestige of being a “listed entity,” there are tangible, high-value benefits for your organization.

A. Access to Zero Coupon Zero Principal (ZCZP) Instruments

This is the game-changer. The ZCZP is a financial instrument specifically designed for NPOs.

• Zero Coupon: The investor gets no interest.
• Zero Principal: The investor gets no money back.
• The Return: The return is the Social Impact created.
• The Mechanism: It functions like a donation but with the structure of a bond. Corporates can buy these ZCZPs to fulfill their CSR obligations transparently.

The Instrument: What is a “Zero Coupon Zero Principal” (ZCZP) Bond?

Let’s demystify the financial jargon. When you list on the SSE, you issue ZCZP instruments.

• It is NOT a Loan: You do not have to pay the money back.
• It is NOT Equity: You do not give away voting rights or ownership of your Trust/Society.
• It IS a Donation with a Ticker Symbol: Think of ZCZP as a “standardized donation certificate.” When a corporate donates ₹1 Crore via SSE, they “buy” these instruments. The instruments do not yield interest; they yield Impact.
• The Maturity Date: The instrument “matures” not when you repay money, but when you complete the project and submit your final Social Audit Report.

Recent SEBI Update: Democratizing Donations (March 2025)

SEBI recently lowered the minimum application size for ZCZP instruments from ₹10,000 to just ₹1,000.

Why this matters for you: Previously, SSE was a playground only for HNIs and Corporates. With this change, you can now run a “Retail Campaign.” Imagine asking your 5,000 Instagram followers to donate ₹1,000 each directly via their Demat accounts (like Zerodha or Groww). This opens up a massive new retail fundraising channel that sits right alongside your corporate CSR pipeline.

B. The “Blue Tick” of Credibility

Listing on the SSE serves as a rigorous due diligence filter. If you are listed, it signals to international donors, CSR heads, and HNIs that your organization has passed SEBI’s scrutiny. You essentially get a “validity badge” that separates you from the crowd.

C. Standardized Impact Reporting

Listing forces an internal discipline regarding data collection and impact measurement. While this sounds like work, it actually makes your grant proposals 10x stronger because you have audited data to back your claims.

3. Eligibility Criteria: Are You Ready?

SEBI has laid out strict technical criteria to ensure only genuine entities enter the ecosystem.

Legal Requirements

Your entity must be registered as one of the following:

• Charitable Trust: Registered under the Public Trust Act or Trusts Act, 1882.
• Society: Registered under the Societies Registration Act, 1860.
• Section 8 Company: Registered under the Companies Act, 2013.

Mandatory Compliance Thresholds

1. Age: The entity must have been operating for at least 3 years.
2. Tax Status: Valid registrations under Section 12A/12AB and Section 80G of the Income Tax Act.
3. Spending: Annual spending of at least ₹50 Lakhs in the past financial year.
4. Funding: Annual funding received of at least ₹10 Lakhs in the past financial year.

The “Primacy of Social Intent” Test (The 67% Rule)

To qualify, your organization must demonstrate that social welfare is its primary goal. SEBI quantifies this via the 67% rule. You must meet at least one of the following:

• 67% of Revenue comes from providing eligible social activities.
• 67% of Expenditure is incurred on eligible social activities.
• 67% of the Beneficiary Base belongs to the target segment (underprivileged/underserved).

4. The Process: From Registration to Listing

The journey involves three distinct phases. It is rigorous, but structured.

Phase 1: Registration (The Gatekeeper Phase)

Before you can raise a single rupee, you must register on the SSE segment.

• Submission: We compile a comprehensive dossier including your Constitution, Audited Financials (3 years), Governance structure, and Tax certifications.
• Review: The Stock Exchange (BSE/NSE) reviews the application to ensure “Fit and Proper” criteria are met (e.g., no pending regulatory actions).
• Outcome: You receive a Registration Certificate. At this stage, you are “Registered” but not yet “Listed.”

Phase 2: Listing & Fundraising (The Launch)

Once registered, you can launch a specific project via ZCZP instruments.

1. Draft Fundraising Document (DFD): Similar to a prospectus in an IPO. It details the specific project, the budget (e.g., ₹1 Crore for building 5 rural schools), and the expected social outcome.
2. Social Audit Review: A Social Auditor reviews the feasibility.
3. Public/Private Placement: You can issue these instruments privately (to specific CSR bodies) or publicly.
4. Listing: Once fully subscribed (minimum subscription is usually 75%), the ZCZP instruments are listed on the exchange.

The New Guardian: Who is the “Social Auditor”?

Listing introduces a new professional into your ecosystem: the Social Auditor. These are professionals certified by the National Institute of Securities Markets (NISM).

Unlike a financial auditor who checks where the money went (receipts and ledgers), a Social Auditor checks what the money did.

• Did you actually plant 10,000 trees?
• Did the literacy rate in the village actually go up by 20%?

Our Role: We prepare your team for these audits. We help you set up the “Data Collection Framework” so that when the Social Auditor arrives, your impact data is organized, verifiable, and impressive.

Phase 3: Post-Listing Compliance

This is where transparency shines. You must submit an Annual Impact Report (AIR). This report captures the qualitative and quantitative impact of the project and must be audited by a certified Social Audit Firm.

5. Technical Nuances & How We Simplify Them

The SSE process involves navigating a complex web of legal (SEBI ICDR Regulations) and financial (LODR Regulations) frameworks.

Common Roadblocks we see:

• Misalignment in Trust Deeds/MoAs regarding “Social Intent.”
• Inability to quantify “Social Impact” for the 67% rule.
• Structuring the ZCZP fundraising document to appeal to CSR investors.

Our Approach: We view SSE listing not as a “compliance task” but as a strategic asset. We act as your technical partners throughout the lifecycle:

1. Pre-Audit: We review your financials and legal documents before submission to ensure 100% eligibility.
2. Narrative Building: We help articulate your “Social Intent” in a language that satisfies both SEBI regulators and future investors.
3. Handholding: From the initial filing with BSE/NSE to the final listing of your ZCZP instruments.

Listing on the SSE is a bold step. It moves your organization from the informal economy of charity to the formal economy of social equity.

Traditional Fundraising vs. SSE Listing: A Comparison

Tax Implications for Your Donors

A common question is: “Does an investor get tax benefits?” Yes. The Central Board of Direct Taxes (CBDT) has clarified that contributions made to ZCZP instruments on the SSE are eligible for 80G benefits, provided your entity holds a valid 80G certificate.

Furthermore, for Corporate donors, buying ZCZP instruments counts as 100% eligible CSR Expenditure under the Companies Act, 2013. This makes your project an attractive, “compliance-ready” product for corporate CSR heads.

Trailblazers: It’s Already Happening

Organizations like SGBS Unnati Foundation became the first to list, raising nearly ₹2 Crores to train unemployed youth. They didn’t just raise money; they set a benchmark. Their listing proved that the market is hungry for credible, transparent social projects.

The Key Takeaway: The “Early Mover Advantage” on the SSE is real. Being among the first 100 listed entities in India will give you visibility that money cannot buy.

Conclusion :- “Listing is a journey, not a toggle switch. If you are unsure whether you meet the ‘67% Social Intent’ rule or the ‘Minimum Spending’ criteria, we offer a Pre-Listing Diagnostic. We review your last 3 years of activity and tell you exactly where you stand before you approach the Exchange.”

5. Decoding the Myth: “Is the SSE Only for NPOs?”

One of the most persistent misunderstandings about the Social Stock Exchange is that it is exclusively for non-profits.

This is factually incorrect.

Under SEBI regulations, a “Social Enterprise” is a broad umbrella term that includes two distinct categories:

1. Not-for-Profit Organizations (NPOs): Trusts, Societies, and Section 8 Companies.
2. For-Profit Social Enterprises (FPSEs): Private Limited Companies or Body Corporates that operate for profit but have a social-first mission.

The Hybrid Model: Profit with Purpose

If you are a private company—for example, an AgTech startup helping marginal farmers or a HealthTech company providing affordable dialysis in Tier-3 cities—you are likely a For-Profit Social Enterprise.

While NPOs list to raise “donations” (via ZCZP), you list to raise “Impact Capital.”

How FPSEs Differ from NPOs on the Exchange

The “Social Intent” Bridge

The common thread is the 67% Primacy of Social Intent. Whether you are a for-profit company or a silent trust, you must prove that two-thirds of your revenue, expenditure, or beneficiaries come from the 17 eligible social activities defined by SEBI.

Why Should a For-Profit Company “Identify” as a Social Enterprise?

1. Attract Impact Investors: Global “Impact Funds” specifically look for the SSE “Social Enterprise” tag to deploy capital.
2. Valuation Premium: Companies that can prove audited social impact often command better brand loyalty and higher valuation multiples in the modern ESG-conscious market.
3. Institutional Credibility: Being identified as an FPSE on a recognized exchange removes the “greenwashing” doubt that many private social ventures face.

Expert Insight: Many “Section 8” companies assume they are the only ones who can raise social capital. However, if you are a Private Limited Company with a strong social mission, you can skip the “NPO Registration” and move directly towards Listing your Equity as a Social Enterprise.

*Crucial References – Social Stock Exchange India, SEBI SSE Registration, Zero Coupon Zero Principal, ZCZP, NGO Listing on SSE, Section 8 Company Fundraising, Social Audit Framework, Impact Investing India, NISM Social Auditors, BSE Social Stock Exchange, NSE Social Stock Exchange, Primacy of Social Intent, 67 Percent Social Activity Rule, CSR Funding via SSE, Annual Impact Report, Non-Profit Fundraising Instruments, For-Profit Social Enterprise, SEBI ICDR Regulations, 80G Tax Benefits SSE, Social Impact Disclosure Standards

CA Ankit Gulgulia (Jain)

FCA, CWM (AAFM-US), CBV, CIFRS, R-ID, B.COM (H), RV* (IBBI)

Practising Chartered Accountant in Delhi NCR Since 2011. He can be contacted at ankitgulgulia@gmail.com or +91-9811653975.