SEBI has proposed to the government to amend the Companies Act, 2013, to include donations made through social stock exchanges (SSEs) as part of CSR activities.

• Objective: The proposal aims to integrate SSE contributions into Corporate Social Responsibility (CSR) mandates under the Companies Act.

About Social Stock Exchanges (SSEs)

• Introduction:  It was Proposed by Finance Minister Nirmala Sitharaman in the FY20 budget.
• SSEs are platforms within stock exchanges where non-profit organizations focused on social welfare can list to raise funds.
• Operational Platforms: Both BSE and NSE operate social stock exchanges
• Current Listings: There are currently eight non-profit organizations listed on the NSE SSE, as stated by an NSE spokesperson.
• The minimum donation through SSEs is ₹50 lakh, as per a SEBI notice.
• Benefits 
  • SSES will give credibility and visibility to social enterprise
  • It will also help in increasing transparency and accountability in the social sector.
  • SSEs will allow donors to invest in social enterprises through zero coupon zero principal (ZCZP) securities. 
    • These securities will not provide any monetary returns, but they will allow donors to support the work of social enterprises.
  • SSEs will give donors more confidence that their donations are being used effectively.

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About Corporate Social Responsibility (CSR)

CSR is the idea that companies should evaluate and take responsibility for their impact on the environment and social welfare.

• • It promotes positive social and environmental change.
• Main Types of CSR:
  • Environmental Responsibility
  • Ethical Responsibility
  • Philanthropic Responsibility
  • Economic Responsibility
• Applicability under Companies Act 2013
  Criteria for Applicability: CSR provisions apply to companies with:
  • An annual turnover of ₹1,000 crore or more
  • A net worth of ₹500 crore or more
  • A net profit of ₹5 crore or more

Activities under CSR

Schedule VII of Companies Act 2013: Specifies major CSR activities, including:

• Eradicating hunger, poverty, and malnutrition; promoting education and gender equality.
• Combating AIDS, HIV, and other health disorders.
• Ensuring environmental sustainability.
• Protecting national heritage, art, and culture, including restoring historical buildings and sites.
• Supporting armed forces veterans, war widows, and their dependents.
• Training to promote rural sports, nationally recognized sports, paralympic sports, and Olympic sports.
• Contributing to the PM’s National Relief Fund or other central government funds for socio-economic development and relief.

What are the Current CSR Rules?

• CSR Spending Requirement: Companies must spend at least 2% of their average net profit over three years on social welfare activities listed in the Companies Act, 2013.
• Eligible Donations: Currently, companies can donate to non-profit organizations outside of SSEs under their CSR activities but cannot use SSEs for this purpose.

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