Social Stock Exchanges (SSE) are meant to facilitate fund raising by eligible social enterprises by issuing Zero Coupon Zero Principal Instruments (ZCZP). The SSE framework is provided for in the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 (ICDR Regulations), SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR Regulations) and various circulars issued by SEBI from time to time. The SEBI (Alternative Investment Funds) Regulations, 2012 (AIF Regulations) provide for the setting up of Social Impact Funds which can invest in the securities issued by the Not-for-Profit Organizations (NPO) listed on SSE.
The SEBI (Issue of Capital and Disclosure Requirements) (Third Amendment) Regulations, 2022 and the SEBI (Listing Obligations and Disclosure Requirements) (Fifth Amendment) Regulations, 2022 which both took effect on July 25, 2022, introduced SSEs and ZCZPs into the ICDR Regulations and the LODR Regulations respectively. On the same day (July 25, 2022), the SEBI (Alternative Investment Funds) (Third Amendment) Regulations, 2022 amended the AIF Regulations to introduce Social Impact Funds as a sub-category of Category I AIFs and enabled them to invest in securities (including ZCZPs) issued by NPOs listed on SSEs. The Securities and Exchange Board of India (SEBI) proposes to modify the minimum value of investment in Social Impact Funds and the minimum subscription and registration period for Not-for-Profit Organizations (NPO) on SSEs under its regulations. Therefore, SEBI has issued a consultation paper dated February 09, 2026 (Consultation Paper) soliciting comments and suggestions on the following proposals. The proposed changes to the SSE framework have been mooted by SEBI in consultation with the Social Stock Exchange Advisory Committee.
- Currently, the proviso to Regulation 10(c) of the AIF Regulations provides that the minimum investment by an individual in a Social Impact Fund, which invests only in securities of NPOs registered or listed on a SSE, is Rs. 2,00,000 (Rupees two lakh only). SEBI proposes to reduce this minimum investment threshold from Rs. 2,00,000 (Rupees two lakh only) to Rs. 1,000 (Rupees one thousand only).
- Regulation 292F of the ICDR Regulations currently provide that if an NPO wants to raise funds through an SSE, it must first be registered on that SSE. After an NPO is registered on an SSE, it can remain in this “registered but not raising funds” status for a maximum of two years from the date of registration. Before the expiry of this two‑year period, the NPO must have at least one project listed on the SSE and for that project, it must have actually raised funds through the SSE. In this Consultation Paper, SEBI has proposed that the aforementioned period of two years may be increased by an additional year subject to approval by SSEs.
- Paragraph 1.4 of SEBI’s Master Circular on Social Stock Exchange (SSE) Framework dated January 19, 2026, prescribes that a minimum of 75% of the issue size (or funds earmarked for the project/working capital) must be subscribed, failing which the issue is to be withdrawn, and the application money refunded. In the Consultation Paper, it has been proposed that the minimum subscription required to be achieved for an issue of Zero Coupon Zero Principal Instruments (ZCZPs) shall be only 50% of the issue size in case where the project cost is structured for implementation on a clearly identifiable per-unit basis and the funds raised are capable of being meaningfully deployed on proportionate basis towards the disclosed object in the fund raising document. The Social Stock Exchanges shall undertake appropriate due diligence to ensure that the deployment of funds raised and implementation of the project are aligned with the per-unit structure, prior to granting approval for the fund raising.
| ELP Comments |
- The ICDR Regulations initially fixed the minimum application size for subscription to ZCZPs at Rs. 2,00,000 (Rupees two lakh only). Subsequently, with effect from March 19, 2025, in order to enhance investor participation, the minimum threshold for subscription to ZCZPs was reduced to Rs. 1,000 (Rupees one thousand only). If SEBI’s proposal to reduce the minimum value of investment in Social Impact Funds is reduced from Rs. 2,00,000 (Rupees two lakh only) to Rs. 1,000 (Rupees one thousand only), it will align the investment threshold in the AIF Regulations for Social Impact Funds with the minimum subscription size for ZCZP under the ICDR Regulations.
- The default minimum subscription required to be achieved for an issue of ZCZPs will continue to be 75% of the issue size. However, minimum subscription will be 50% of the issue size for projects where the cost of the project and intended outcomes of the project can be proportionately allocated on a ‘per unit’ basis. In such cases, partial subscription would not adversely affect the project implementation. If the cost of the project and intended outcomes of the project cannot be proportionately allocated on a ‘per unit’ basis, the minimum subscription will continue to be 75% of the issue size.
- It is likely that the proposed reduction in the required minimum subscription for ZCZPs from 75% to 50%, once implemented, will encourage the participation of NPOs on SSEs for raising funds.
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The Consultation Paper can be found here.
We trust you will find this an interesting read. For any queries or clarifications please write to us at insights@elp-in.com or write to our authors:
Vinod Joseph, Partner – Email- – Email – vinodjoseph@elp-in.com
Paridhi Jain, Partner – Email- – Email – paridhijain@elp-in.com
