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- The role of Professionals under the redefined PMLA
We have oftentimes come across news items wherein doctors and other persons in the medical profession have been charged of negligence under the Consumer Protection law, leading to them being more cautious in their work. Now, it is the turn of professionals like Company Secretaries (CS), Chartered Accountants (CA) and Cost Accountants (CMA) to be more cautious in the performance of their professional duties as a government notification dated 3rd May 2023 have brought all these three professions within the ambit of a much-dreaded law – the Prevention of Money Laundering Act, 2002 or simply the PMLA. So, what does it really mean for the professionals? Why do they tend to suddenly feel being in deep water now? In this article, I will elaborate on the scope and objective of this Act and the enhanced responsibility put on the shoulder of these professionals to curb money laundering in the country. In order to set the tone for discussion on this topic, let us first dive a little deeper into what the PMLA is all about. So let us have a look at some important points from the Act. Prevention of Money Laundering Act, 2002 The Prevention of Money Laundering Act, 2002, which, along with the rules framed thereunder, came into force w.e..f. 1st July, 2005, was enacted by the Parliament of India with a view to preventing the heinous activity of money-laundering in the country. The idea behind was to aid the global efforts against money laundering and related crimes. With a view to combatting such illegal activities, apart from strict punishment, including imprisonment, the Act also provided for confiscation of any property acquired from or through laundered money. Definition of Money Laundering Section 3 of PMLA defines the term as follows: “Whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime including its concealment, possession, acquisition or use and projecting or claiming it as untainted property shall be guilty of offence of money-laundering. *Explanation – (i) For the removal of doubts, it is hereby clarified that – (i) a person shall be guilty of offence of money-laundering if such person is found to have directly or indirectly attempted to indulge or knowingly assisted or knowingly is a party or is actually involved in one or more of the following processes or activities connected with proceeds of crime, namely – (a) concealment or (b) possession or (c) acquisition or (d) use or (e) projecting as untainted property or (f) claiming as untainted property in any manner whatsoever (ii) the process or activity connected with proceeds of crime is a continuing activity and continues till such time a person is directly or indirectly enjoying the proceeds of crime by its concealment or possession or use or projecting it as untainted property or claiming it as untainted property in any manner whatsoever – Section 3 of Prevention of Money Laundering Act as amended w.e.f. 1-8-2019. *The explanations were added in an amendment in 2019. Inter-connected transactions Where a certain transaction involves two or more transactions that are inter-connected and one or more of such transactions are found to have involved money laundering, then the other transactions shall also be presumed to come under money-laundering as inter-connected transactions and accordingly shall be subject to adjudication or confiscation. Financial Intelligence Unit – India (FIU-IND) This unit was set by the Government of India in 2004 as a central agency to receive, process, analyse and disseminate information relating to financial transactions alleged to be related to money laundering. It is an independent body reporting directly to the Economic Intelligence Council (EIC) headed by the Finance Minister of India. Under the PMLA Act and Rules, banking companies, financial institutions and intermediaries are under obligation to verify the identity of clients, to maintain records and furnish necessary information in prescribed format to the Financial Intelligence Unit - India, in short, the FIU-IND. Person Carrying on Designated Business or Profession Section 2(1)(sa) defines “person carrying on designated business or profession”. Until before the notification under discussion, the following persons were included within the definition: (i) a person carrying on activities for playing games of chance for cash or kind, and includes such activities associated with casino; (ii) Inspector-General of Registration appointed under section 3 of the Registration Act, 1908 (16 of 1908) as may be notified by the Central Government; (iii) real estate agent, as may be notified by the Central Government; (iv) dealer in precious metals, precious stones and other high value goods, as may be notified by the Central Government; (v) person engaged in safekeeping and administration of cash and liquid securities on behalf of other persons, as may be notified by the Central Government; or Sub-section 2(1)(sa)(vi) authorises the Central Government to designate by notification when certain other activities performed for or on behalf of another natural or legal person will come under the ambit of money laundering, or in other words, to designate other persons carrying on designated business or profession. Notification number S.O. 2036(E) was issued under this provision on 3rd May 2023 to include in the definition of “person carrying on designated business or profession” a ‘relevant person’ carrying on certain activities on behalf of their client shall be. The term ‘relevant person’ has been defined in the explanation to mean a practising Company Secretaries (CS), a practising Chartered Accountants (CA) and a practising Cost Accountants (CMA). Hence CSs, CAs and CMAs are now persons carrying on designated business or profession. Reporting Authority Section 2(1)(wa) of PMLA defines ‘reporting entity’ as a banking company, financial institution, intermediary or a person carrying on a designated business or profession. The role of a reporting entity under PMLA is the following: Maintenance of records of all transactions in such manner as to enable it to reconstruct individual transactions (for a period of five years from the date of transaction between a client and the reporting entity) Furnish to the Director within such time as may be prescribed, information relating to such transactions, whether attempted or executed, the nature and value of which may be prescribed Maintenance of record of documents evidencing identity of its clients and beneficial owners as well as account files and business correspondence relating to its clients (for a period of five years after the business relationship between a client and the reporting entity has ended or the account has been closed, whichever is later) Every information maintained, furnished or verified, except as otherwise provided under any law for the time being in force, shall be kept confidential by the Reporting Authority. The Director under the Act may call for from any reporting entity any of the above records and the reporting entity is required to furnish to the Director such information within such time and in such manner as may be specified. Every such information sought by the Director must be kept confidential. Section 12AA of PMLA requires the reporting authority to ensure enhanced due diligence prior to commencement of each specified transaction as follows: (a) verify the identity of the clients undertaking such specified transaction by authentication under the Aadhaar (b) take additional steps to examine the ownership and financial position, including sources of funds of the client, in such manner as may be prescribed (c) take additional steps as may be prescribed to record the purpose behind conducting the specified transaction and the intended nature of the relationship between the transaction parties In case if the client fails to fulfil the conditions listed above, the reporting entity must not allow the specified transaction to be carried out. If any specified transaction or series of specified transactions undertaken by a client is considered suspicious or likely to involve proceeds of crime, the reporting entity shall increase the future monitoring of the business relationship with the client, including greater scrutiny or transactions in such manner as may be prescribed. The information obtained while applying the enhanced due diligence measures must be maintained by the reporting authority for a period of five years from the date of transaction between a client and the reporting entity. Explanation u/s 12AA defines ‘specified transaction’ to mean— (a) any withdrawal or deposit in cash, exceeding such amount; (b) any transaction in foreign exchange, exceeding such amount; (c) any transaction in any high value imports or remittances; (d) such other transaction or class of transactions, in the interest of revenue or where there is a high risk or money-laundering or terrorist financing, as may be prescribed. Onus or burden of proof Where a person is accused of being involved in money laundering, the onus is on him to prove that the alleged proceeds of crime have actually been lawfully acquired by them. Punishment for money-laundering The PMLA prescribes a punishment of 3 to 7 years rigorous imprisonment to any person found guilty of money-laundering. However, if the offence also comes within the ambit of Narcotic Drugs and Psychotropic Substance Act, 1985, the maximum term of rigorous imprisonment shall be 10 years. Attachment of property The property acquired by using the proceeds of crime or the laundered money can be confiscated by the Adjudicating Authority. Adjudicating Authority In terms of sub-section (1) of section 6 of the PMLA, an Adjudicating Authority has been constituted to exercise jurisdiction, powers and authority conferred by or under this Act. The Adjudicating Authority under PMLA has powers to regulate its own procedure and is not bound by the procedures laid down in the Code of Civil Procedure,1908. Appellate Tribunal Section 25 of the PMLA mandated the Central Government to establish an Appellate Tribunal to hear appeals against the Adjudicating Authority and other authorities under the Act. The section was amended in 2016 to provide that the Appellate Tribunal constituted under sub-section (1) of section 12 of the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 (SAFEMA) shall be the Appellate Tribunal for hearing appeals against the orders of the Adjudicating Authority and the other authorities under the PMLA also. This Appellate Tribunal under (SAFEMA) is one of the earliest tribunals in the country and also hears appeals under the Sea Customs Act, 1878, the Customs Act, 1962, the erstwhile FERA, 1947, the FERA, 1973, and those related to persons detained under the COFEPOSA whose detention orders were neither revoked by the Government nor set aside or quashed by the courts of competent jurisdiction, subject to the conditions specified in Section 2 of the Act. Orders of this tribunal can be appealed against in the appropriate High Court and finally to the Supreme Court. Notification dt. 3rd May 2023 Sub-section 2(1)(sa)(vi) authorises the Central Government to designate by notification when certain other activities performed for or on behalf of another natural or legal person will come under the ambit of money laundering. Under this provision, on 3rd May 2023, notification number S.O. 2036(E) has been issued by the Ministry of Finance, Department of Revenue, Government of India. As per this notification, the below-mentioned financial transactions carried out by a ‘relevant person’ on behalf of their client shall be considered as an activity relating to money laundering. The term ‘relevant person’ has been defined in the explanation to mean a practising Company Secretaries (CS), a practising Chartered Accountants (CA) and a practising Cost Accountants (CMA). The following financial transactions have been identified in the notification: Buying and selling of any immovable property; Managing of client money, securities or other assets; Management of bank, savings or securities accounts; Organisation of contributions for the creation, operation or management of companies; Creation, operation or management of companies, limited liability partnerships or trusts, and buying and selling of business entities. Hence, going forward practising CSs, CAs and CMAs will be covered under the scanner as and when they execute any financial transactions on behalf of a client. Members belonging to all the three professions are on thin ice now. Their vigilance, carefulness, due-diligence and strict professionalism will be tested more rigorously from now on. Concluding observations The new notification under PMLA is a bold step of the government towards speeding up its battle against anti-money laundering activities. The new provisions are expected to help probing against dubious transactions by shell companies involved in money laundering. But by providing an inclusive definition of ‘relevant person’ to include these three professions only, the government has clearly shown its intent of keeping practising advocates or any other person out of the net, although they might also be in the position to do any of the financial transactions identified in the notification as connected to money laundering, on behalf of the client. However, the more optimistic thinking on the part of these professionals would be to consider this move as a reassurance of the reliance the government has always had on these three professions, this time in its battle against money laundering. The proof of this can be found in section 2(1)(wa) of PMLA which now includes these three professions within the meaning of a ‘reporting entity’. Reporting authorities are mediums in the hands of the government for gaining information about dubious transactions. So, CS, CA and CMAs are now expressly clothed with the responsibility of being whistle blowers in case they come across any such transactions. If they are not careful enough, they will be hauled up for being partners in the crime of money laundering by their clients. If professionals have been handling the money of the client for financial transactions on their behalf whether in India or abroad, now it is a better idea for them to stay away from doing so. #PMLA #Moneylaundering #laundering #professional #reportingauthority #Enforcement #CS #CA #CMA
- Deciphering business phrases or corporate jargons
Corporate buzzwords or jargons, often also called business phrases or corporate metaphors, are important part of corporate life as they tend to simplify complicated concepts into a simple word or phrase. Frequent use of such phrases or terms makes it easy for the people in the organisation to understand and gradually becomes part of the corporate culture. Buzzwords are also said to improve employee engagement as difficult tasks seem to become simpler through usage of such jargons. Daily activities and objectives also often become interesting due to the use of such phrases. One might argue that sometimes the jargons are too complicated to understand, giving rise to the question as to why at all they exist. But think about it, explaining the same kind of work or activity, or procedure to be followed, especially when difficult concepts are involved, would not only be a time-taking exercise, but also boring to a large extent. So, the jargons actually save us time and prevent us from getting bored. They save time by using a simple term for a complicated concept. 5 popular business jargons Some business buzzwords may be organisation specific, or applicable to a particular industry only and impliedly, we are not dealing with the same. I would rather take up five such phrases or jargons that are frequently used in the corporate environment. Be it in an email, or in verbal communication, the use of a business jargon may also get one perplexed if he fails to understand its meaning. Also, some of us may have a vague idea about these jargons, some may interpret them wrongly. The idea behind this article is to help readers decipher the correct meaning of such jargons and use them correctly. All-Hands Meeting Such a meeting is also often referred to as ‘all employee meetings’, ‘company-wide meetings’, as also ‘town hall’ or ‘company scrum’ in the western world. It implies a company-wide meeting held on a regular basis when employees from all departments, their heads, people from the management and other stakeholders meet to discuss important matters of relevance to the company. Such meeting aims at updating everyone within the organisation about the status of the business. During this meeting all stakeholders come to know about the thoughts and ideas of the promoters and direction of the organisation, about new information, processes, awards, achievements and other updates. It helps bring transparency and clear confusions, if any. Ideally an All-Hands meeting is convened and presided over by a CXO and held at regular intervals, whether in physical or in virtual mode. Such meetings are different from team-building meetings which are directed towards strengthening the bond, trust and productivity of a certain team or department in an organisation. These meetings are the diametric opposite of one-on-one meetings. The purpose of such meetings is to keep everyone within the organisation informed and updated about the current state of its business and its future plans. Such meetings are an effective tool in the hands of the management to collect important feedback from employees, make major announcements, enhance employee motivation through awards or praises, encourage group brainstorming, allow participants to ask questions, address grievances and introduce new leaders within the organisation. The frequency of such meetings varies from company to company. Depending on the size and the industry to which it belongs, it might choose to have such meetings as frequently as ‘daily’, or weekly, or once every quarter or annually. Deep Dive into something Deep diving into something in a business scenario means a stricter and more thorough type of brainstorming on it. It is an intense, in-depth analysis of a topic, a problem or a situation in a shorter span of time. Once you deep dive into something, you get a better grip on that topic. Deep Diving helps in creation of ideas and also in understanding a problem and solving it better. So, when a senior asks an employee to deep dive into a certain subject or project, he is basically asking the latter to come up with a more detailed study and report by way of further brainstorming. Reinvent the wheel This jargon implies ‘wasting time in trying to do something that has already been done successfully’. It means to work on an idea or solution that one considers new or different, while in reality it is nothing better that something that already exists. So, basically, it means wasting time doing unimportant things, fiddling around or frittering away. The idea behind the use of this metaphor is to save valuable time and useless or unimportant efforts and is often meant as a warning or admonishment. Seniors often use the phrase to imply the futility of an activity of a junior. Circle back to something This business jargon essentially means coming back to a certain thing later or considering it again. This is considered to be the most used business phrase. So, it implies something two persons have already discussed and yet they want to return to it. It often indicates that there was a meeting where something was discussed, but nothing was finalised and the participants need to have yet another discussion on it. On the very face of it this jargon is about an activity that is useless and avoidable. This jargon, as per a study conducted in the US, is the most disliked business jargon. The concept is totally in favour of indecision and procrastination. So, people who like promptness and action, will always be annoyed or upset by the use of this business phrase, and one needs to be extremely careful before using this jargon. It might come off as the person saying this avoiding the other person, or putting off the discussion on the particular topic. Often the person using the phrase does so to buy some time to make a decision. But it also shows the lack of commitment on his side. Phone tag Phone tag, also called the telephone tag, is a situation where two parties try to contact each other by phone/telephone, but none of them is able to get a hold of the other person and end up not being able to have a conversation. In such situations the two persons are said to ‘play’ telephone tag. In the bygone era of wired telephones fixed to a particular place, it would often be because when one person calls the other person was out and vice versa. In today’s age of mobile phones this includes a situation when two persons trying to call each other are constantly busy on other calls. Telephone tag is often used as an excuse for not being able to connect with a person.
- Shadow IT: Benefits, menaces and controls
In this age of ever-increasing threats to cybersecurity, Shadow IT is a growing menace. It is a danger that hovers like dark cloud over the IT infrastructure of an organisation. However, there is no denying the fact that there are many benefits of Shadow IT as well. In this article I intend to discuss this new business jargon in more details. When IT was new, most applications were tested rigorously and purchased as packages that came with warranty. Today, there are IT applications for just about everything. And they are all available at the click of a button, and in most cases, even free of cost. What is Shadow IT? The term refers to any type of system, software, hardware, devices, applications or IT resources used by employees in the organisational network without the IT department's express approval and in most cases without even the IT department's knowledge. Such a practice can take place in various forms, and while it comes with many inherent benefits, it violates compliance norms and poses major threats to the security of IT infrastructure in an organization that include data leaks and other cybercrimes (detailed later). With the exponential growth of Information and Technology globally and the adoption of cloud-based services, the chances of threats to IT systems have also sky-rocketed. While there is no denying the fact that Shadow IT can enhance the productivity of employees and also encourage creativity and innovation, this rapid growth of cloud-based applications has also given rise to increased usage of shadow IT. Common Shadow IT applications Some of the best examples of Shadow IT are applications like Slack, Dropbox, Google Drive, Google Docs, Microsoft Office 365, Cloud storage services, Skype, WeTransfer, Excel Macros, various file compressing applications, messengers, various videotelephony software like Zoom, Microsoft Teams, servers, etc and hardware like personal computers or laptops, tablets and smartphones. Why Shadow IT? The question arises, why at all does Shadow IT exist? The answer is simple. Firstly, getting the exact application one needs right at that moment of need, may be difficult in an organisational perspective as it has to pass through various time-consuming stages of proposal, review, rigorous testing and final purchase. Secondly, we often tend to be more comfortable with applications we use personally on a day-to-day basis and we often tend to take initiative to popularise such applications amongst our peers in the organisation. Thirdly, the recent concept of ‘Bring Your Own Device’ or BYOD (allowing employees to use their own laptops or smartphones in office) has contributed to the exponential rise of Shadow IT. Benefits of Shadow IT Despite its risks, shadow IT has its benefits, some of which are as follows: Adoption of Shadow IT applications is lucrative as it is simple to work on. In many cases Shadow IT is more efficient because its market is competitive. Shadow IT applications are available at the click of a button Taking approval from IT department for purchase of a particular software application often takes time and in contrast, using Shadow IT applications is fast and there is no wastage of time. And we all know that time is money. Examples of Shadow IT To understand the concept better, let us take a few practical examples of Shadow IT: An employee stores sensitive information in a shadow IT cloud application. An employee discovers a more effective and faster file-sharing application than the one approved by the in-house IT department, and starts using it. Gradually the usage also spreads to other members of the organisation. File sharing through applications like Google Docs can lead to data leak. An employee who intends to complete a certain task at home but does not carry office device to home sends the work documents to his personal email id. This exposes the confidential organisational data to networks that are beyond the control and monitoring of the IT department. Shadow IT Risks I must clarify here, I have no intention of stating that Shadow IT is bad, it is inherently not dangerous. But sometimes mindless usage may result in menaces like data leaks and compromise of security. Shadow IT not only results in technological risk, but also business risk and reputational loss. The following are some specific risks associated with usage of Shadow IT: Extended attack surface as any device connected to the network gets exposed to potential cybercriminals Because of Shadow IT an organization may lose confidential data or control over any data Shadow IT may result in regulatory or legal non-compliance An organisation may lose vital client or other information where an employee stores sensitive information in a shadow IT cloud application and the same becomes the victim of a cyberattack Any data leakage or cyberattack could result in financial loss for the organisation that might include costs associated with data retrieving, legal costs, costs involved in salvaging reputation etc. Managing Shadow IT and reducing associated risks As information and technology continues to grow and keep innovating, it is expected that Shadow IT applications will also increase, and in a large way it will dominate our lives, both personal and professional. However, adopting certain checks and best practices might help organizations reduce the risks associated with usage of Shadow IT. The following are some such preventative measures that can contain the menaces of Shadow IT: Discovering the Shadow ITs being used is the first step towards finding the solution The inhouse IT department must know the needs of the employees Educating employees about Shadow IT and the risks associated with its usage Encouraging employees to monitor and manage unsanctioned applications Responsibility of cybersecurity must be built into the organisational culture. The idea is to find a middle ground between the IT department and business unit or user so that they can use some shadow IT while allowing the IT department control user permissions and data for those applications. To this end, organisations may need to rethink and redraft their internal codes and policies that clearly state to what extent and in what form Shadow IT is acceptable. Conclusion There are good sides of Shadow IT and bad sides as well. To run organisations in this age of increasing usage of information and technology, the best strategy is to find a middle path. Employees may be encouraged by the IT department to find efficient IT applications that work faster and answer their needs in the best way and IT department may in turn control the data and user permissions for such applications. This will also free up some time of the IT department for more strategic and business-specific IT work. #BYOD #ShadowIT #risk #cyber #cybercrime #cybersecurity
- ESG and Corporate Moral Responsibility
ESG is a relatively new concept and quite naturally, therefore, there is little awareness or understanding about it. Some organisations take ESG just as an extension of Corporate Social Responsibility (CSR). But that’s a very myopic view of ESG. It is a much larger concept that is related to investment decisions also. For businesses around the world, ESG is becoming increasingly important. The concept of ESG, first popularized in 2005, refers to a broad range of environmental, social and governance criteria on which the performances of companies are measured. The practices of a company with respect to these parameters have been rather neglected in the traditional system of financial reporting. However, in this article we will not delve deep into the intricacies of the concept, but instead we will try to find out the connection between the concept of ESG and corporate moral responsibility. But first of all, we need to start with a few definitions that are crucial to understanding this subject. Moral Responsibility Every individual is responsible for each of his/her activities or inactivities, decisions or indecisions and comments or silences. We are solely responsible for the impacts of all choices we make in our lives. While all such choices or actions do not necessarily have a ‘moral’ component in them, in our everyday life we often refer to certain things being the ‘moral responsibility’ of a certain person. By doing so we try to indicate that this certain person has some duties or obligations, meaning some responsibility, by a certain standard. Maintaining such responsibilities are expected of people both in their personal as well as professional capacities. In other words, these are their moral responsibilities. A person is held accountable for these duties and obligations. Corporate Moral Responsibility Having gone through the last paragraph, we now know what individual moral responsibility means. Now, the question arises, do businesses have moral obligations or responsibility too? Can the concept of moral responsibility be extended to artificial legal persons also? Is corporate social responsibility (CSR) different from corporate moral responsibility? For more than three decades now, the question as to whether companies can be held liable for their actions morally and psychologically, has been subject to heated debates around the world. Let us have a look at it. An organization is a group of people coming together wilfully to achieve a set of common goals. These individuals have collective accountability to all stakeholders. This collective accountability is referred to as corporate moral responsibility. The owner or manager of a business has multiple responsibilities, which include legal as well as moral responsibilities. The former implies maintaining various compliances, payment of taxes, corporate governance and so on while the latter imposes the obligation of doing what is right and accountability for all the actions of the business. Thus, corporate moral responsibility encompasses the entirety of opinions, decisions and actions with which individuals in charge of an organisation run it. The following are some of the examples of moral responsibilities of business: · Payment of fair and timely wages · Non-employment of child labour or forced labour · Workplace safety and healthy working environment · Non-discrimination amongst employees · Fair treatment of all employees · Making available safe and good quality products to customers · Accounting for social and environmental costs implemented CSR vs. Corporate Moral Responsibility One should definitely not confuse Corporate Moral Responsibility with Corporate Social Responsibility. Through the CSR framework, the regulators have ensured the contribution of certain profitable organisations towards the progress of the society. However, CSR does not have any scope for moral obligations of a business towards those whom it affects through its actions and to those who make a difference in it. Hence, corporate moral responsibility requires separate focus and emphasis. ESG ESG refers to what an entity has done or not done in the last financial year with respect to compliance of certain non-financial parameters that are required to be reported by it as a step forward towards serious sustainability movement globally. It is essentially used to evaluate non-financial factors like environmental impacts of a business, corporate sustainability and social responsibility. The sustainability of an organisation is valuable to all its stakeholders like the investors, employees, consumers, supply chain partners, bankers etc. With a view to promoting this sustainability, ESG focuses on the environmental, social and governance practices of an organisation that have been rather neglected in the traditional system of financial reporting. An organisation adopting ESG principles essentially means that in its corporate strategy it focuses on the three pillars of environment, social, and governance. Adopting ESG is an expensive and time-consuming exercise, but it yields returns in the future in the form of sustainability and greater investor trust. ESG reporting brings in transparency about the organisation’s activities, the risks it is exposed to and the measures it adopts to mitigate those risks and to ensure sustainability. The ESG Reporting requires an organisation to collect, analyse and disclose its ESG data. Both the availability and quality of ESG data collected and reported by an organisation are crucial from the standpoint of the stakeholders. ESG and corporate morality ESG can very well be described as the moral duty of a business. It mainly encompasses the moral impact of the business activities and governance of an organisation. ESG makes organisations look beyond their economic activities and apply considerations of ethics and morality in making better business decisions and developing more robust strategies. In the business world, until very recently, the moral obligation of businesses were restricted to compliance of law in letter. To a certain extent morality was brought into businesses through the introduction of the stakeholder concept during the later part of the last century. Now with the introduction of #ESG, the concept of moral responsibility has been infused into businesses in a much greater way. Conclusion Today businesses are increasingly expected to do the ‘right thing’. Just as they contribute to social responsibilities, they are also expected to be morally responsible for their actions. To ensure this the persons steering the business and affairs of the organisation are expected to maintain a balance between maximising profitability and accountability, and between increasing business operations and philosophy and moral obligations. In this regard the introduction of the concept of ESG is a big step towards ensuring that the parallel intent of organisations towards increasing social well-being do not get derailed or side-lined, rather they remain in focus. #corporatemoralresponsibility #ESG #corporatesocialresponsibility #moralobligation #corporatemorality #moralobligationsofbusiness
- Plagiarism: A menace to be avoided by professionals
The question is not of money, not fame, not anything more or less lucrative, it is about having and maintaining self respect, being able to look at the mirror and smile, of ethics, of professionalism. Introduction Plagiarism is defined as an act of attempting to pass off the work of another person as one’s own work. It is a type of theft of intellectual property that is quite prevalent in educational institutions. However, such offences are also rampant in workplaces. It is an offense with wide implications and long-lasting effects. By committing plagiarism, individuals bring themselves under personal risk. They might be subjected to penalties in case a lawsuit is brought against them. Apart from this, it is also a loss of goodwill and reputation and trust. Plagiarism may take place in different ways. The most detestable way of plagiarizing is to directly take parts or lines of already published work of somebody else without giving the reference to the original writing. This amounts to passing off another’s work as someone’s own and is a serious wrong. Giving an acknowledgement to the original writer is the minimum that a writer can do without demeaning themselves and without hurting anybody else’s sentiments while at the same time being legally correct. Copying someone else’s words is often intentional, but it is not necessarily always so. Sometimes it may just be accidental, when someone forgets to acknowledged the source of the information. It definitely is a kind of stealing, that of words, ideas, sources, an intellectual theft. But in all cases, it can have far-reaching consequences. So, it is important for all of us, whether academicians, authors, professionals, or just students, to try and avoid committing plagiarism. In this article, I have not got into the depth of legalities of plagiarism, as regulated by the Copyrights Act, 1957, but dwelt more on the ethics and morality of the same. My intention is to appeal to professionals to contribute original thoughts and writings that will go a long way to develop the literature in a particular professional area. Types of plagiarism Knowing about the different types of plagiarism is a great way to prevent it, at least the unintentional version of it. The following are some types of plagiarism: Ghostwriting Plagiarism: The most dangerous (read criminal) type of plagiarism is when one just puts their name to someone else's original work. Also called ‘plagiarism of authorship’, here another’s work is passed off as their own by the alleged plagiarizer. Copy-Paste Plagiarism: This type of plagiarism is very common and takes place when a writer simply picks up one or more sentences/paragraph ‘as it is’ from a certain source, uses them without quotations marks and does not provide any reference to the source. Photocopy Plagiarism: This type of plagiarism takes place when one writer copies a substantial part of another person’s work, whether published or not, without any changes or use of their own inputs or opinions. Paraphrasing plagiarism: This type of plagiarism takes place when someone changes words in an existing work by some other words. The writer ideally looks for synonyms for keywords used in the original work and rephrases certain sentences. But in such cases the end product is not quite different from the original. It is also often called word-switch or patch-work plagiarism. Disguised Plagiarism: Sometimes the writer borrows from other sources, and changes the keywords and sentences here and there. The patchwork is disguised as an original one, but the essence of the work remains the same as the source. Idea Plagiarism: Plagiarism is not always with respect to words or phrases; one may be accused of idea theft also. When a writer picks up a creative idea from another work and does not provide necessary credit to it, such plagiarism would be called idea plagiarism. Secondary plagiarism: This type of plagiarism takes place when a writer picks up a sentence with seemingly necessary reference to the original work from a secondary source and uses the same without bothering to look up the original source to confirm what it actually mentions. Self-Plagiarism: When a particular work of the writer is already published and copyrighted by the publisher, borrowing from that source, even though their own, may result in plagiarism and violation of agreements entered into while publishing the original work. In other words, self-plagiarism is like ‘Old wine in a new bottle’. Such plagiarism also takes place when the writer submits the same article for publication at two different places simultaneously and both are accepted. Direct vs. Accidental Plagiarism: The former is a word-for-word copying of another person’s original work that the writer produces without any quotation marks or reference to source. On the other hand, plagiarism can take place accidentally when the writer forgets to provide reference to the original source, or unintentionally provides misinformation. Other types of plagiarism: Sometimes authors properly mention the original author’s name, when citing a study, work or idea, but miss out on putting the original quote within quotation marks. This also amounts to plagiarism. Similarly, citing the original author and source without sufficient information about where to find that work, also amounts to plagiarism as the author is ultimately indirectly passing the work off as his own. Similar type of plagiarism takes place when the author provides inaccurate, misleading information about the source. Ghostwriting: the ethics of it Ghostwriting is common and almost an accepted practice in public speeches or social media posts by celebrities or political leaders. Honorary authorship is another type of ghostwriting that is quite common in the institutional level. This takes place when a person holding a senior position is named as the author although the actual work was done by someone else or a department headed by the former. Such practice is also common in scientific research. The actual writers receive no or little credit but this is often done with their knowledge and implied consent. Another place where ghostwriting is prevalent is in popular Talk Shows that are often scripted in advance, with little to no credit of the on-screen host. Also, books by famous persons are often actually ghostwritten (and there are writers who willingly take up this as a career). Ghostwriting is also the accepted way in bureaucratic documentation. The last one is a very large subject in itself and needs a separate research or deliberation, and I choose to avoid it in toto in this article. In cases of ghostwriting with the consent of the actual writer (mostly contractual in nature) plagiarism often become morally acceptable. The original writers often see this as strengthening their own resumes. (We will not go to the debate of the extent to which the financial constraints of the original writer led him to agree to enter into the contract in the first place or the power and influence that was exerted on them or whether his consent was at all voluntary.) Legal Plagiarism This is one of the biggest areas in which plagiarism is rampant. Legal plagiarism is especially a very big menace in India and only shows the lack of appropriate legal research caliber in our country. This largely points fingers at our legal education system and the need to strengthen it. Why plagiarism should be avoided? Plagiarism is unethical, and in essence, it is a kind of theft of intellectual property. The beneficiary of such theft is the plagiarizer and not the original writer. By passing off someone else’s work as one’s own, the latter also deceives the readers of such work. Further plagiarizers can often get caught in legal battles over copyright and end up paying huge penalties. This also leads to huge loss of reputation of the plagiarizer. By plagiarizing, a person not only deprives the original author the due credit for their work, they themselves often become lazy and thus deny themselves the opportunity to learn and produce work based on their own work and thinking. In short, they deprive themselves of the opportunity to become an original and continue to remain a copy. Plagiarism detection Manual detection of plagiarism can be very difficult. Internet has, however, made such detection very easy. Today there are various softwares, some even available free of cost online, that are capable of detecting plagiarism. Such softwares can look for plagiarism in an uploaded document by comparing it with thousands of other published works. And in a matter of seconds the results may be seen; the matching texts are highlighted and link of the original sources are provided. However, often the original sources detected by the plagiarism detectors are also plagiarized works. But it definitely helps to understand whether the work in question, for which plagiarism is being checked, is plagiarized. It is immaterial whether or not it was plagiarized from a secondary source. Concluding remarks We often indulge in writing as it helps us increase the reach of our work. But there is a very thin line that demarcates the border between research and plagiarism. In this age of widespread internet access, while publishing a work is relatively easy and the reach of published works are faster, plagiarism is also all the more rampant. As an academician or professional who is publishing a work/article, it is important to be ethical and honest. There is nothing wrong in being inspired by someone else’s work, or publishing a follow-up research document of the former, but the same should be clearly mentioned through appropriate citing, references, acknowledgement and quotation marks wherever necessary. In fact, the more the literature in a particular discipline the faster is its development. So, it is always a great idea to contribute largely to a discipline by writing frequently and investing in follow-up research works. All we need is appropriate acknowledgement of the original writer, thinker or researcher.
- Compliance as a Profit Centre
Compliance involves cost, and hence, it has always been regarded as a Cost Centre. However, I have always had a different opinion. As a prolific writer, I have had a desire to address this issue for more than a decade now. I am happy to be able to do it finally. I hope the following paragraphs on the captioned subject will be self-explanatory. What Is Compliance Cost? Compliance cost includes all the expenses an organisation or entity incurs in order to comply with all the regulations applicable to the industry it belongs to. In a broader sense it would also include salaries of employees assigned the task of compliance, the cost of time spent on complying and the money spent in preparing various reports, new software systems introduced to make the compliance work faster and so on. The common areas of compliance for companies in all industries include company law compliances and regulatory filings, CSR (where applicable), environmental compliances, human resources and labour law compliances, mandatory health and safety compliances, various types of audits, adhering to various applicable standards (e.g. auditing standards, accounting standards, secretarial standards, etc), various types of taxes and so on. Compliance cost rises as regulatory requirements in an industry increases. These regulations may be local, national as well as international in nature. Some apply to all industries, some are based on market capitalisation of the company while others are sector specific. Certain others are applicable based on the financial results of a company. So as the organisation increases its reach to various geographical jurisdictions globally, its compliance cost also increases. Compliance Cost vs. Regulatory Risk Cost vs. Conduct Cost Compliance cost is not the same thing as regulatory risk or conduct cost. Regulatory Risk Cost is the cost associated with the risk that companies face due to potential change in the existing regulations in future. Conduct costs are the costs a company incurs for breaking the extant regulations. Rising compliance cost Compliance costs for companies globally have been rising as regulatory requirements are becoming more stringent. With the advent of the concept of corporate governance, the ‘stakeholders’ view replaced the traditional ‘shareholder’ view that was much narrower in approach, and entailed much lesser compliance cost. There are other factors also that have resulted in increase in compliance cost of companies. Some such factors are globalisation of business, modernisation, increased awareness about environmental pollution and climate change, increased acceptance of social responsibility, requirement of fraud detection and reporting, data privacy measures and so on. New regulations, like those against money laundering, deceptive advertisements and marketing, anti-competitive business, violation of consumer protection laws, prevention of sexual harassment etc., are being continuously introduced, thus adding to the compliance cost. Further, as a company grows, although it benefits from ‘economies of scale’ even with regard to compliance costs, certain costs like those associated with access to the capital market and the resultant compliance cost increases. Cost of Non-Compliance Although cost for compliance has been on the rise globally, a number of studies have revealed that it is even more costly not to comply with regulations. In others words, the cost of non-compliance is always higher than the cost of compliance. A study shows that the former is 2.7 times the latter. To put it simply, a company that avoids or fails to pay the compliance cost in time ends up paying a minimum of 2.7 times the amount of default as non-compliance cost. Thus, in a country like India, failing to meet regulatory compliance requirements in prescribed time and manner costs companies some thousands crore rupees. The staggering amount is because of the fact that costs of non-compliance actually go far beyond simple fines. As they say, the fine a company pays for non-compliance, is only the tip of an iceberg. The actual financial burden of non-compliance would also include other hidden costs. Based on the severity of the non-compliance, one or more of the following costs may also be incurred: - Cost of time and paperwork in replying to show cause notices - Cost of disruption in business - Cost of loss in reputation of the company - Cost of loss of stakeholder’s trust - Cost of loss of productivity - Cost incurred in inspection and investigation - Cost of products that have been seized from market due to con-compliance - Cost of injunctions - Cost of resultant litigation - Cost of compensation - Cost of compounding of offences The above costs form part of cost of non-compliance and are over and above cost of fines, penalties and other fees. Further, repeated non-compliance may result in long term loss of reputation that may even harm the branding of a company, resulting in permanent threat to business. Certain things like customer trust, goodwill, brand image etc. once lost are difficult to win back. Avoiding Cost of Non-Compliance The cost of maintaining compliance is thus much lesser, and impliedly easier to manage, than the cost of dealing with non-compliances. By creating a robust compliance structure and having a good compliance team an organizations can not only avoid fines and penalty but also ensure that there is no reputation damage, slowdown in production and avoidable litigation in future. As they say, “Prevention is better than cure”, the best approach for all organisations to avoid high costs of non-compliance is to have a robust compliance planning and compliance officials. Ineffective Compliance is as bad as Non-Compliance If compliance is not done in time, and in the manner required, it is as bad as non-compliance. Hence, in this article, whenever we talk of compliance cost, we mean efficient and timely compliance cost only. Compliance Cost as a Profit Centre Compliance has always been treated as a Cost Centre. Ensuring high levels of compliance indeed involves some costs. It must be treated as a Profit Centre as, although not directly, but indirectly it does add to a company's bottom line profitability. A proper compliance management system in an organisation ensure the benefits of better efficiency, that leads to higher productivity, lowers chances of process and system failures, lower deviations from standards that reduces rejections, and the consequent cost of rework, enhances reputation leading to better market share and resultant increased revenue. Need for more compliance professionals With increased dedication to avoiding non-compliance, an organisation would ideally require more compliance personnel, in the senior, middle and junior levels. Initially this would seem to increase the cost of compliance, but in the long run, this actually reduces the cost of non-compliance, which is multiple times the cost of compliance incurred. Larger organizations have double the benefit resulting out of economies of scale.
- Carbon Neutrality vs. Net Zero from a corporation’s perspective
In this age of growing conversation about sustainability and ESG, terms that are making inroads to corporate jargon and increasingly becoming popular around the world are ‘net zero’, ‘carbon neutrality', ‘climate positive’ and so on. Corporate citizens are becoming increasingly aware of their responsibility towards protecting the environment and ensuring sustainability. Often the two terms, ‘carbon neutral’ and ‘net zero’, are used interchangeably, although they do not necessarily mean the same and identical thing. In an era when corporates and professionals are beginning to understand the implications of ESG, sustainability goals, climate change etc. it is pertinent to use the right words in the right place. So, in this article we will talk about these terms and the distinctions between them. In the wake of increased awareness about #ESG reporting, corporations often express their desire (and/or plan) of becoming carbon neutral. This means they intend to remove the equivalent amount of harmful gases emitted to the atmosphere by them. They essentially start the process by cutting down their CO2 emissions to the extent possible first, and top it up by investing in carbon offsetting or carbon mitigation programmes. This is done essentially by investing in ‘carbon sinks’ which mean forests, oceans or other natural environments that are capable of absorbing equal, if not more, carbon from the atmosphere than they emit. Carbon sinks help organisations to offset or balance out their emissions and thereby allow them to maintain a clean corporate conscience. Carbon neutral vs Net zero vs. Climate Positive It is very important to understand the difference between the three terms. Let us look at their definitions first: Carbon Neutral Carbon neutrality means having a balance between emitting carbon and absorbing carbon from the atmosphere. In other words, it means that the sum of carbon any corporation puts into and absorbs from the atmosphere comes to zero. This is done through a combination of efficiency measures that reduce in-house emission and carbon offsetting programmes. Net Zero Net zero on the other hand, implies that the sum total of the amount of a combination of greenhouse gases or GHGs, that include carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), sulphur dioxide (SO2) and other hydrofluorocarbons that is emitted by the corporation’s activity and the amount removed by it from the atmosphere is zero. In other words, an equivalent amount of GHGs emitted by it is removed by it from the atmosphere. This implies that net zero is similar in concept to carbon neutrality, but is larger in scale. Climate positive It is a concept with a much larger implication. It means an attempt at achieving beyond net-zero carbon emissions by removing greenhouse gases beyond what has been released into the atmosphere. Summing up Summarizing our discussion above, we can see that both the concepts of net zero and carbon neutrality have the same objective, which is to remove harmful emissions from the atmosphere, but the scale and kind of emissions removed are different. And achieving a ‘climate positive’ world is the most ideal situation, although, practically not necessarily the most achievable one. A ‘Net Zero’ world Attempts to achieve a net zero world are being taken up across the world, and is a cause for concern for world leaders and features on national agendas. To achieve this, the efforts of governments alone will not suffice, organisations as well as individuals must come together. An organisation targeting at ‘Net Zero’ is ultimately attempting to benefit all its stakeholders. In order to do so, corporations must measure, track and control their GHG emissions through a process called carbon accounting. Some activities that are intended towards achieving this ideal are reducing wastage of electricity, recycling water, avoiding food waste, promoting car pool services amongst employees across all levels, recycling packaging material, reducing use of paper and avoiding wastage of stationery and so on. Not just corporations, as individuals, we also have a role to play towards ensuring a net zero world. We must also adopt a sustainable lifestyle and reduce our carbon footprints to ensure minimum negative impact on the environmental.
- Sunset Clause: Their relevance in contracts and regulations
Sunset Clause or Sunset Provision A ‘sunset clause’ or ‘sunset provision’ is a measure within a law, regulation, statute or contract that provides that the law, or certain obligations therein, shall cease to have effect after a specific date, unless the law is extended by legislative action. In other words, it is a clause, or a provision contained in a contract or in a regulation that makes the latter automatically expire on a specific date. Sunset Clause had its beginning as a concept in public policy. Most statutes and regulations do not have this clause and hence, they are generally timeless. The only way to end their applicability is by repealing the law. But a ‘sunset clause’ is like a ‘periodic review’ of an enactment or statute. They are generally part of all major international treaties and agreements because there is an assumption that temporary validity of such treaties and agreements have many benefits, the greatest of which is the safeguarding of the sovereignty of states. International investment agreements also contain sunset clauses, but generally the same should not stretch for too long a duration. The construction of sunset clauses varies from regulation to regulation and contract to contract, and there is no specific format for it. Sunset date When relating to a regulation, it is the date on which the law or provision thereof automatically expires, and when relating to a contract, it is the date on which the legal obligations of a party(ies) to a contract will cease to have legal effect. A sunset date is thus like an ‘expiry date’ or ‘termination date’. After this date, a contract will no longer be enforceable. Sunset Laws These are the laws, regulations or statutes that have a sunset clause and are liable to automatically get repealed on a certain date or within a certain time. Ideally such laws are enacted by the government when a quick action (like in an urgent situation) is required and the appropriateness for such law for a longer time is still under study. In urgent situations a law with a sunset clause is more likely to get votes as such clause makes it the much-needed temporary solution. Most of the time-bound legislations and notifications released during the COVID-19 pandemic are examples of sunset laws. The rationale behind The idea behind allowing inclusion of a ‘sunset clause’ in any law is ideally to enable the lawmakers to make a law for a limited period of time when government action is required for a limited time or when the long-term consequences of such law is difficult to foresee. If every law was to be compulsorily timeless, the impossibility to foresee every future happening while drafting such law or regulations would make it a fruitless exercise. We all know, and agree, that “the only constant in life is change”, and we must also ensure that every regulation is made with this in the back of the mind. Sunset Clause in contracts Worldwide, and even in India, sunset clauses are rather common in contracts and agreements. Such clause imposes a contractual obligation affecting one party or more parties that will expire automatically after a certain period of time or a specified ‘sunset date’. The contract termination can also be linked to the occurrence or non-occurrence of an event. Thus, the objective of a sunset clause in a contract is to define the duration of the legal obligation of the contracting parties prior to entering into a contract. However, the contracting parties can mutually agree to modify the contract to either extend the sunset date or eliminate it altogether from the contract. Examples of sunset clause An easy example would be a software license agreement that comes with the sunset clause that a particular software version will no longer be supported after a specific date. This indicates that the software company will not have any obligation with respect that particular software after that ‘sunset’ date. Another example is an insurance contract wherein the parties can include a sunset date on reaching which certain coverages to the insured person will automatically expire. Yet another example may be taken from the real estate industry wherein a clause in a contract may require the property developer to finish the project by a certain date and the failure to comply with the same would render the contract void. Types of Sunset Clause Sunset clauses may be of the following types: (i) Entire vs. sectional : The clause may apply to the entire regulation/contract or only to certain rights and obligations under it. (ii) Direct vs. indirect : The clause may be explicitly mentioned and named so or may be implied by the provisions. (iii) Conditional vs. unconditional : Sunset may be made applicable based on certain conditions or may also be unconditional. (iv) Time-linked vs. Event-linked : Termination of a contract or cessation of a regulation may be linked to a specific time or the occurrence or non-occurrence of an event. (v) Expiration vs. Reauthorisation : The termination may be absolute or subject to a review and reauthorisation after a certain time period. Advantages 1. Social circumstances and legal requirements change over time necessitating the revision of laws 2. With the sunset clause in a contract, one party can compel the other party to act 3. The obligations of one or both party(ies) automatically expires on a specific date. The parties do not have to take any steps to terminate the contract, to invoke rights under the contract or to not be legally bound by the provisions etc. 4. In many cases the sunset clause becomes a starting point of periodic review and renewal Disadvantages 1. In many situations, a party to a contract may use a sunset clause to abuse another party. 2. In most cases parties to a contract often forget the existence of a sunset clause in a contract, and that certain rights expire or that certain obligations are to be performed by a specific date. This will result in them losing certain contractual rights. 3. Sometimes the sunsets come with arbitrary time frame in which the whole idea loses the charm. While drafting such contracts or agreements the parties must be very careful about the clauses and must properly understand the rights, duties and obligations a sunset clause brings and negotiate it before making it a part of the agreement. Sunset Clause in India In India sunset clauses are common in tax and fiscal laws. Examples are tax exemptions, tax holidays etc. A recent amendment in the SEBI (ICDR) Regulations have also brought in sunset clauses in corporate law. We will know more about these in the following paragraphs. Sunset clause share conversion Companies may use a sunset clause to convert certain classes of shares to another class and make the same time-linked or event-linked. The Securities & Exchange Board of India (SEBI) amended the ICDR Regulations in 2019 to introduce superior voting rights (SR) framework specifically for technology intensive issuer companies. I will not go into the rationale behind doing so and would rather prefer to keep it for a future detailed article. The long-debated shares with differential voting rights (DVR) so introduced by SEBI are internationally known as dual class shares (DCS). They come with two types of shares, one with superior voting rights and the other with inferior voting rights. The SR shares have disproportionate voting to their economic ownership and the SR Shareholders get more than one vote per share on a poll. The amendment introduced a framework with many checks and balances including a sunset clause i.e. the duration during which such an SR shareholder shall enjoy superior voting rights. The sunset clauses were inserted to set the date for the conversion of a DVR into shares with equal voting rights. This new framework has two types of sunset clauses: time-linked and event-linked. Under the time-linked sunset, the SR Shares will automatically convert to ordinary shares after 5 years from listing, subject to a one-time extension of further 5 years through a resolution in which the SR shareholders cannot vote. Under the event-linked sunset certain events have been identified on the occurrence of which, the DVR framework would lose its value and therefore, conversion to ordinary shares would be triggered. These events are: (a) Demise of the promoters holding SR shares; (b) Resignation of the SR shareholder from the executive position and (c) Merger or acquisition of the company having SR shareholder where the control would be no longer with SR shareholder. Doctrine of promissory estoppel & validity of sunset clause The doctrine of promissory estoppel is an equitable doctrine that seeks to prevent injustice. It prevents a promisor to retract from his promise where while acting on such promise of the promisor, the promisee has already altered their position. There are many judgments that have held that this doctrine is applicable even against the Government. The issue of withdrawing exemptions, with or without time limit attached to them, has been the subject of judicial decisions several times before the Indian courts. More than 90% such exemptions in India are timeless when issued. The government has the power to terminate the notification at any time, which usually, is done at the time of the annual Finance Budget. Such withdrawal of exemptions are generally not challenged and this is the accepted way in our country. There have been several judgments in the past which state that the government cannot withdraw exemptions as it will hurt the principle of promissory estoppel [Hindustan Spinning and Weaving Mills v Union of India, 1984 (17) ELT 281 (Bom)]. However, in a more recent case, Mind Tree Ltd vs Union of India, 2013 (295) ELT 641 (Kar), the legislative competence of the government to impose a sunset clause in a notification was challenged on the ground that it was against the doctrine of promissory estoppel. The Karnataka High Court rejected the contention and observed that the government is competent to change a notification by imposing a sunset clause and that it does not hurt the doctrine of promissory estoppel. It further observed that it is a settled position of law that every tax exemption and incentive shall have a sunset clause and that every fiscal legislation providing for tax exemption must have a life span fixed in the enactment. The Karnataka High Court even went on to observe that not having a sunset clause is a flaw and the same has been corrected by imposing a sunset clause. This goes on to conclude that the government has legislative competence to issue both time-bound and timeless notifications and withdraw exemptions granted earlier and the same would not amount to violation of the doctrine of promissory estoppel.
- Stewardship: A new vision for businesses
One of the newest terms in the corporate lexicon is ‘stewardship’. To understand what it exactly means, we have to dig a little deeper. Meaning of Stewardship The dictionary meaning of stewardship is “the conducting, supervising, or managing of something, especially the careful and responsible management of something entrusted to one's care” [www.merriam-webster.com] The origin of the term goes back to when a ‘steward’ was a household servant and his sole duty was to bring food and drink to his master's dining hall. In course of time the responsibilities of a steward were extended to include other domestic services and household management needs. Further down the line, commercial stewardship evolved and providing service to passengers on ships, trains, flights or luxury buses and to guests in hotels or restaurants were brought within the ambit of the meaning of stewardship. Today the concept of stewardship has also been embraced by other fields (it may seem completely unrelated though) like economics, environment, health, property, information & technology, theology and so on. Stewardship vs Sustainability Both the words are often used interchangeably, but they are not identical concepts. There is a thin line of difference between the two. #Sustainability means ‘meeting current needs without sacrificing the ability of future generations to meet their own needs by balancing environmental, economic and social concerns’ while #stewardship means ‘the careful and responsible management of something entrusted to one's care’. So, while the former authorizes corporations to ‘use’ the resources and at the same time to ensure that the right of the future generations to use the same resources is not jeopardized, the latter essentially makes corporations ‘caretakers’ of the valuable resources. They are not only required to manage them but also to ensure that the same are passed on to the future generations in the same form if not better. Stewardship in business And that brings us to our topic for discussion. Today, stewardship is one of the terms in the ever-expanding corporate lexicon. Stewardship would ideally mean an ethical approach to responsible planning and management of resources. It is generally considered to be the acceptance of responsibility to safeguard the valuables of others. In terms of corporate stewardship, it would ideally mean accepting the responsibility of taking care of the organization or property by those who are entrusted with the duty. Going deeper into it to find the implication, it would mean that those who are entrusted with the wealth or valuables of any kind by others have an obligation to hand those assets down in a shape better than they themselves inherited them. That would imply being responsible beyond one’s own interest (selfless), and such responsibility extending beyond one's lifetime (long-lasting). Thus, in today’s corporate scenario, stewardship would refer to taking responsibility for the business of the company and the effects it has on the world around and on the generations to come. It is taking a humane view and adopting a sustainable approach to business. The traditional concept of ‘shareholder wealth maximization’ has been at the root of many corporate scams, resulting in the creation of a ‘credibility and trust crisis’ for corporations generally. The effect of these have been a paradigm shift towards ‘better corporate governance’, increased compliances, enhanced transparency and wider stakeholder participation. The concept of stewardship is the newest entrant to the list of models being researched upon by champions of corporate sustainability in pursuit of responsible business behaviour. For small and medium-sized businesses, the concept of corporate stewardship may seem not to be helpful in their day-to-day struggle to survive. But as corporations grow bigger, stewardship concept needs to be intertwined with their business ideology for them to thrive. Examples of stewardship The following are some examples of application of the corporate stewardship approach: i. using renewable resources and biodegradable materials, ii. producing products that are not harmful to the environment, iii. using email communication to reduce paper consumption, iv. reducing and recycling of waste, v. ordering items in bulk to cut down on the need for repetitive shipping, vi. considering environmental effects of new inventions and innovations, vii. holding all kinds of meetings in hybrid mode to cut down the necessity of unnecessary travel by participants located at different locations (who can join via video conferencing), viii. encouraging pool car facilities for employees to promote the twin objective of intra- organisation social cost and reducing carbon footprint, ix. having captive power generation unit using renewable energy sources x. promoting the conservation of energy like fuel, electricity etc. Breaking down the concept To understand the concept of business stewardship better, we can break it down to a few sub-concepts as follows: Corporate Stewardship Corporations around the world are increasingly beginning to realise the negative impacts of their businesses (like climate change, deforestation, water shortage, contamination of water, increased pollution, unequal distribution of wealth and so on) and are showing active interest on working to alter the same and being more responsible for their actions not only in the interest of their current and future stakeholders but also in the interest of the society. This approach is called corporate stewardship. Environmental Stewardship In the wake of the increased concerns about the environment, many businesses around the globe have realised that it is important for corporations to be environmentally sustainable. This has prompted them to realign their businesses in a more sustainable way. This approach is called environmental stewardship. Service-Oriented Stewardship The human factor is very important in the success of businesses. Managing the human factor, and the various stakeholders amongst them is vital for long term sustainability. This includes employees, customers, suppliers, partners and local community, and managing the interactions with them and in between them is an important part of business stewardship. Proper codes of conduct and communication manuals must be developed in the interest of business. This is service-oriented stewardship. It may be noted that in India, this concept of corporate stewardship and environmental stewardship forms the basis of the mandatory provisions of Corporate Social Responsibility (#CSR) u/s 135 of the Companies Act, 2013. There are also various laws that have been enacted to make environmental and service-oriented stewardship mandatory, like the environment protection laws, labour laws, consumer protection laws, and so on. However, when we talk of ‘stewardship’, we are implying compliance beyond what is mandatory. Costs of stewardship Taking up a corporate stewardship approach definitely comes at a cost. But this should not be a deterrent to taking up stewardship. In certain cases, the company can offset the same from tax-credits, if any. A company can also benefit of saving when using renewable energy as part of stewardship. In jurisdictions where carbon tax is applicable, stewardship may also help a company save on the same. Conclusion It wouldn’t be wrong to say that all types of businesses engage in some activities that have negative environmental consequences, but not all of them take up stewardship. Adopting the stewardship model can definitely help them find more sustainable practices, while at the same time improve its goodwill and reputation in the society in general and among the c onsumers in particular as also save money in certain cases. As per the stewardship model a business leader should be like a responsible steward contributing to the wellbeing of his customers, suppliers, employees as well as community members. Corporations must act ethically and responsibly for the common good of all stakeholders, the present as well as the future and the planet. Those organisations, that haven’t yet implemented the Stewardship Model, must consider doing it now.
- GHG Gases as in BRSR Report – explained for professionals
The Securities and Exchange Board of India (SEBI), in its Guidance Note to the Business Responsibility and Sustainability Reporting (BRSR) format as in Annexure II, clearly indicates in point 6 under Principle 6 [Businesses should respect and make efforts to protect and restore the environment] the Details of Scope 1 and Scope 2 greenhouse gas (GHG) emissions and GHG intensity. It mentions the following gases as included in the term ‘green-house gas’: Carbon dioxide (CO2) Methane (CH4) Nitrous oxide (N2O) Hydrofluorocarbons (HFCs) Perfluorocarbons (PFCs) Sulphur hexafluoride (SF6) Nitrogen trifluoride (NF3) Important Note: Any trade in the #GHG cannot be considered in these scopes. In other words, buying or selling of GHG from any #Carbon Exchange etc. or under any international protocol cannot be considered within the scope 1 and scope 2 above. The #GuidanceNote further mentions the following points which are more or less self-explanatory: 2. Scope 1 emissions are direct GHG emissions from sources that are owned or controlled by the entity. Source refers to any physical unit or process that releases GHG into the atmosphere. Further, any emissions that are not physically controlled but result from intentional or unintentional releases of GHGs, such as equipment leakages, methane emissions (eg: from coal mines), shall also be included in the calculations. 3. Scope 2 emissions are energy indirect emissions that result from the generation of purchased or acquired electricity, heating, cooling, and steam consumed by the entity 4. Entities may, on a voluntary basis, provide a breakup of the Scope 1 and Scope 2 emissions into CO2, CH4, N2O, HFCs, PFCs, SF6, NF3. 5. The entity shall exclude any GHG trades (purchase, sale or transfer of GHG emissions) from the calculation of Scope 1 and Scope 2 GHG emissions. 6. The unit for the disclosures shall be metric tonnes of CO2 equivalent. Further, entities should disclose the standards, methodologies, assumptions and/or calculation tools used, including sources of the global warming potential (GWP) rates and emission factors used. 7. Scope 1 and Scope 2 emission intensity per rupee of turnover shall be calculated as the total Scope 1 and Scope 2 emissions generated divided by the total turnover in rupees. 8. Apart from turnover, entities may on a voluntary basis, provide Scope 1 and Scope 2 GHG emission intensity ratio, based on other metrics, such as: • units of product; • production volume (such as metric tons, litres, or MWh); • size (such as m2 floor space); • number of full-time employees The listed entities, while preparing their BRSR Report, must keep the above points in mind. It is very important for them to collect accurate data of GHG emissions in respect of the entity’s operations for proper GHG accounting. GHG Emissions Management System In order to properly manage the GHG emissions by an entity it is important to understand the meaning and types of GHG gases. Definition of Greenhouse Gases Greenhouse gases (GHGs) are some gases in the earth's atmosphere that absorb heat and emit radiant energy. When the sun shines during the day, it warms up the earth's surface, but after sunset, the surface cools down, and releases heat back into the air. During this process some of the heat gets trapped by the greenhouse gases in the atmosphere. It may be noted that GHGs are stronger and last a shorter time in the atmosphere than others, which are less potent but last longer. Types of Greenhouse Gases There are numerous forms of GHG emissions that cause climate change; the 26th UN Climate Change Conference (COP 26) held in Glasgow in October – November 2021 lists seven main types of GHGs. It requires that using the national GHG inventories, each country will report on its progress towards the COP26 targets. The following are the seven types of GHGs explained: Carbon dioxide (CO2): Carbon dioxide is a gas that is released into the atmosphere as a by- product of burning fossil fuels like coal, natural gas, and oil as well as other solid waste, trees, and other biological materials (e.g., manufacture of cement). When carbon dioxide is absorbed by plants as part of the biological carbon cycle, it is taken out of the atmosphere (sequestrated). Methane (CH4): When coal, natural gas, and oil are produced and transported, methane is released into the atmosphere. Land usage, livestock, various agricultural practises, and the decomposition of organic material in municipal solid waste landfills all contribute to methane emissions. Nitrous oxide (N2O): It is a gas that is released during the processing of wastewater, the burning of solid waste, and industrial, agricultural, and forestry operations. Fluorinated gases HFCs, PFCs, SF6 and NF3: These are manmade, potent greenhouse gases that are released through a range of domestic, commercial, and industrial applications and processes. These gases include hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), sulphur hexafluoride (SF6), and nitrogen trifluoride (NF3). Compared to other greenhouse gases, fluorinated gases are normally emitted in smaller amounts, yet they are powerful greenhouse gases. They are sometimes referred to as high-GWP gases because, for a given amount of mass, they trap far more heat than CO2, with GWPs that typically vary from thousands to tens of thousands. The global warming potential (GWP) of each GHGs must be stated in tonnes of carbon dioxide equivalents according to reporting guidelines in order to make it easier for organisations and governments around the world to record emissions in tonne of CO2 equivalent (tCO2e). Global Warming Potential (GWP) Multiplying the tonnes of each gas emitted in a given year by its GWP value yields the reporting entity's overall tonne of CO2 equivalent (tCO2e) emissions. For instance, reduction of one tonne of carbon dioxide would result in a decrease of 1 tCO2e, whereas reduction of one tonne of methane would result in a reduction of 25 tCO2e. The following table lays down the potential GWP of the Green House Gases and lists their sources: [Opinions expressed are author’s personal] Author Profile: Dr. Paritosh Nandi holds a Ph.D. degree in Solar Energy Engineering. He is also a Certified Energy Manager and Certified Energy Auditor by Ministry of Power, Government of India. He has been instrumental in developing Clean Development Mechanism (CDM) projects in organisations for the last eleven years and has hands on expertise in ESG. For more detailed profile visit https://www.linkedin.com/in/paritoshnandi/ Author can be reached at email@example.com
- Various types of Board of companies
The board of directors of a company is the highest governing authority within its management structure. Chosen by shareholders, the directors are considered as the trustees of the company's property and money, and they act as the agents in transactions that are entered into by them on behalf of the company. Their primary responsibility is to look out for the interests of the shareholders. The role of the board is supervisory in nature. It sets strategies, oversees the company’s activities and assesses its performance. The members of the board typically meets at regular intervals. Away from the legal meaning or implication of the term ‘Board of Directors’, the BOD may be classified into different types based on the way of its working. Every board or committee works a little differently from another. Sometimes the difference is minimal, but sometimes it may be more obvious. Because of this there are no tailor-made solutions applicable to similar problems of different Boards. In order to decide on the best approach to corporate governance, it is first important to identify what kind of Board a company has. In the following paragraphs is a quick overview of the different types of Board based on the ways they function. 1. Governing Board - A Board where the Promoter of the company is not a part, is said to be a Governing board. The board members consist of persons other than the promoters and the intention of the Board is to provide direction to the owners w.r.t. the best way of running the organisation. The BOD is concerned mainly with the bigger picture and delegate managerial task to people employed in the organisation. 2. Working Board - As opposed to a governing board, a Working board not only deals with the big picture but also simultaneously implements the policies and strategies. This type of board is generally found in smaller or new organisations. 3. Managing or Executive Board - This type of board has its members as Executive Directors and together they runs everything in the organisation on a day-to-day monitoring basis. Such Board will have necessary subcommittees for quick addressing of specific situations within the organisation. 4. Advisory Board - Advisory boards are similar to governing boards and they provide advice and direction to those who are actually running the organisation; the difference is that in case of governing boards the directions are given to employees, in case of Advisory Board, the advice is given to the Board of Director which is essentially in the form of an Executive or Working board. The role of Advisory Board is important in critical matters and delicate situations. 5. Policy Board - This board is similar to the Advisory board, except that in the Policy board instead of advising, the stress is on formulation of organisational policies, practices and directions to guide employees. The CEO or promoter of the company, or other employees implement the work of the policy board. 6. Cooperation Board - As the name suggests, the Cooperation board is one where all members work and vote equally on all points of business. All members are people elected to represent the members of a co-operative or other non-profit organisation. All board members have a singular goal and work to achieve the same. 7. Cortex Board - The Cortex model emphasizes on the value that an organisation creates in the community. The performance of the organisation is measured on the basis of parameters like community standards, giving back, societal expectations etc. 8. Competency board: This type of board has members with specific expertise that brings distinct advantages to the company. For instance, a board may consist of a member with experience in product design, another in advertising, another in finance and another in law. 9. One-tier & two-tier board - One-tier board of directors or Unitary board of directors) is a system in which a company has a single body of directors that performs all the functions of the board. The board comprises of both executive directors and non-executive directors and it performs both managerial and supervisory duties. As compared to this the two-tier board of directors has two distinct boards of directors, a Management Board and a Supervisory Board and their roles are distinct too. The management board is the lower tier and is accountable to the supervisory board. It makes decisions related to operational aspects of the company while the supervisory board makes strategic decisions.
- Social Stock Exchange: The Regulatory Framework
Though Social enterprises (SEs) comprise a very large part of the ecosystem in the country, being unlisted entities they are unable to tap the capital market. There are investors interested in contributing towards social causes in such entities, but due to information about these entities being in the oblivion, such noble intentions often do not see the light of the day. The novel concept of Social Stock Exchange (SSE) is intended to benefit the private and non-profit sectors by directing more capital to them. Timeline The following is a timeline of development of the concept of SSE in India and the relevant regulatory framework so far: July 2019: In her Budget speech for the fiscal year 2019–20, Finance Minister Smt. Nirmala Sitharaman proposed the setting up of SSE in India. September 2019: SEBI constituted a working group on Social Stock Exchanges to review and recommend the possible structures and mechanisms to facilitate the raising of funds by social enterprises and the associated regulatory framework. May 2020: The Working Group on SSE came up with its detailed report and recommendations. September 2020: Technical Group on Social Stock Exchanges was formed by SEBI based on the recommendation of the Working Group May 2021: The Technical Group on SSE submitted its report September 2021: SEBI took a major decision by approving the creation of Social Stock Exchange under its regulatory ambit. July 16, 2022: A Govt. notification introduced a new instrument called ‘zero coupon zero principal instrument’ under the definition of securities under the Securities Contracts (Regulation) Act, 1956. July 25, 2022: SEBI notified Social Stock Exchange (SSE) Rules providing social entities with an additional avenue of raising funds. SEBI notification made amendments to the SEBI (LODR) Regulations 2015 providing for eligibility of entities in order to be classified as ‘Not for Profit organisation’ and ‘For profit Social Enterprise’. Certain amendments were also made by the SEBI (Issue of Capital And Disclosure Requirements) (Third Amendment) Regulations, 2022 to the provisions of the SEBI (Issue of Capital And Disclosure Requirements) Regulations, 2018. September 19, 2022: SEBI came out with a detailed framework for Social Stock Exchange. SEBI’s framework for SSEs was made based on the suggestions of a working group and technical group formed earlier by the regulator. Among other things the framework specified the minimum pre-requirements for a Not-for-Profit Organisation (NPO) in order to be registered as an SSE with the social stock exchange. October 2022: The Bombay Stock Exchange (BSE) received an in-principle approval from the Securities Exchange Board of India (SEBI) to set-up a Social Stock Exchange (SSE) as a separate segment. December 19, 2022: The National Stock Exchange (NSE) received an in-principle approval from SEBI to set-up a Social Stock Exchange as a separate segment. December 27, 2022: SEBI granted its final approval for setting up of an SSE by BSE. What is a Social Stock Exchange (SSE)? Though Social enterprises (SE) comprise a very large part of the ecosystem in the country, being unlisted entities they are unable to tap the capital market. There are investors interested in contributing towards social causes in such entities, but due to information about these entities being in the oblivion, such noble intentions often do not see the light of the day. To fill this gap, SEBI has come up with the concept of Social Stock Exchanges (SSE). The #SSEs will operate like other stock exchanges and SEs will be allowed to list their securities in this exchange. These securities can then be traded by the public and investors interested in investing in social entities will have the information and clarity about them. SSE Framework SEBI has, vide its notification dated 25th July, 2022, made amendments in the SEBI (LODR) Regulations, 2015 that come into effect immediately. These amendments are called the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) (Fifth Amendment) Regulations, 2022. These amendments lay down the framework for SSEs and mainly provide for the eligibility of organizations to raise funds and the eligibility of entities to be classified as ‘Not for Profit Organization’ and as ‘For Profit Social Enterprise’. Under the new framework released by SEBI, an SSE will function as a separate division of the existing stock exchanges. The framework specifies the following: i. pre-requirements to be met by an NPO for registration with a Social Stock Exchange, ii. disclosure requirements for NPOs raising funds through the issuance of zero-coupon zero principal instruments iii. annual disclosure requirements on social stock exchanges for NPOs. In addition to the above, SEBI has mandated the listed NPO to submit a statement of utilisation of funds to the SSE within 45 days from the end of quarter. Further, the social enterprises raising funds using SSE also has to disclose an Annual Impact Report (AIR) within 90 days from the end of financial year, capturing the qualitative and quantitative aspects of the social impact generated by the entity and where applicable, the impact that is generated by the project or solution for which funds have been raised through the Social Stock Exchange. Chapter IX-A of SEBI LODR Regulations The amendments have inserted ‘Zero Coupon Zero Principal Instruments’ in the definition of Securities and notified a new chapter IX-A which deals with obligations of social enterprises. Chapter IX-A of SEBI (LODR) contains the new regulations 91B, 91C, 91D, 91E and 91F and these new regulations provide as under: Zero Coupon Zero Principal (ZCZP) A subscription to the new instrument ZCZP is like a philanthropic donation. ZCZP can be publicly or privately issued by a Not-for Profit Organisation (NPO) upon registering with the Social Stock Exchange to raise funds, subject to the fulfilment of eligibility criteria. Currently, the proposed minimum issue size of ZCZP is at Rs 1 crore and the minimum subscription application size is at Rs 2 lakhs. Eligible SEs The following two types of entities are eligible for raising funds through Social Stock Exchange (SSE) A For Profit Social Enterprise whose designated securities are listed on the applicable segment of the Stock Exchange. A Not-for-Profit Organization that is registered on the Social Stock Exchange. A For Profit Social Enterprise is a company or body corporate operating for profit but having social intent and impact as their primary goal and indulging in at least one of the following activities: (i). Eradicating hunger, poverty, malnutrition and inequality; (ii). Promoting health care including mental healthcare, sanitation and making available safe drinking water; (iii). Promoting education, employability and livelihoods; (iv). Promoting gender equality, empowerment of women and LGBTQIA+ communities; (v). Ensuring environmental sustainability, addressing climate change including mitigation and adaptation, forest and wildlife conservation; (vi). Protection of national heritage, art and culture; (vii). Training to promote rural sports, nationally recognised sports, Paralympic sports and Olympic sports; (viii). Supporting incubators of Social Enterprises; (ix). Supporting other platforms that strengthen the non-profit ecosystem in fundraising and capacity building; (x). Promoting livelihoods for rural and urban poor including enhancing income of small and marginal farmers and workers in the non-farm sector; (xi). Slum area development, affordable housing and other interventions to build sustainable and resilient cities; (xii). Disaster management, including relief, rehabilitation and reconstruction activities; (xiii). Promotion of financial inclusion; (xiv). Facilitating access to land and property assets for disadvantaged communities; (xv). Bridging the digital divide in internet and mobile phone access, addressing issues of misinformation and data protection. (xvi). Promoting welfare of migrants and displaced persons; (xvii).Any other area as identified by the Board or Government of India from time to time A Not-for-Profit Organization is a social enterprise covered within any of the following: a charitable trust registered under the Indian Trusts Act, 1882; a charitable trust registered under the public trust statute of the relevant state; a charitable society registered under the Societies Registration Act, 1860; a company incorporated under section 8 of the Companies Act, 2013; any other entity as may be specified by the Board Which entities are not eligible as SE? It may be noted that corporate foundations, political or religious organisations or activities, professional or trade associations, infrastructure and housing companies, except affordable housing, will not be eligible to be identified as a social enterprise. Which SEs are not eligible to raise fund through SSE? The following social enterprises are not eligible to get registered or raise funds through a Social Stock Exchange – a) if any of its promoters, promoter group or directors or selling shareholders (in case of for profit social enterprise) or trustees are debarred from accessing the securities market by SEBI b) if any of the promoters or directors or trustees of the Social Enterprise is a promoter or director of any other company or Social Enterprise which has been debarred from accessing the securities market by SEBI; c) if the Social Enterprise or any of its promoters or directors or trustees is a willful defaulter or a fraudulent borrower; d) If Social Enterprise or any of its promoters or directors or trustees is a willful defaulter or a fraudulent borrower. e) If any of its promoters or directors or trustees is a fugitive economic offender f) if the Social Enterprise or any of its promoters or directors or trustees has been debarred from carrying out its activities or raising funds by the Ministry of Home Affairs or any other ministry of the Central Government or State Government or Charitable Commissioner or any other statutory body Types of social enterprise w.r.t an SSE The Social Stock Exchange framework identifies the two forms of social enterprises that engage in the activity of creating positive social impact: a. Not-for-profit organisation b. For-profit social enterprise In this connection it may be noted that in order to be eligible for being identified as a Social Enterprise under any of the categories above an entity must establish the primacy of its social intent and in order to do so, such Social Enterprise shall meet the following eligibility criteria:- (a) the Social Enterprise shall be indulged in at least one of the activities [(i) to (xvii)] mentioned above under the definition of For Profit Social Enterprises (b) the Social Enterprise shall target underserved or less privileged population segments or regions recording lower performance in the development priorities of central or state governments; (c) the Social Enterprise shall have at least 67% of its activities, qualifying as eligible activities to the target population, to be established through one or more of the following: (i) at least 67% of the immediately preceding 3-year average of revenues comes from providing eligible activities to members of the target population; (ii) at least 67% of the immediately preceding 3-year average of expenditure has been incurred for providing eligible activities to members of the target population; (iii) members of the target population to whom the eligible activities have been provided constitute at least 67% of the immediately preceding 3-year average of the total customer base and/or total number of beneficiaries. Requirements for NPO Registration In order to be eligible as a Social enterprise, a Not-for-Profit Organisation needs to be in operations for 3 years before registering on the Social Stock Exchange. Further, registration of the NPO on the NGO Darpan portal is mandatorily required for registering it on Social Stock Exchange. Once registered on the SSE, an NPO will have to follow all the compliances under the SEBI (LODR) Regulations, 2015 and the circulars thereof even if it does not list any instruments on the SSE. It may be noted that only Indian entities can register in Social Stock Exchange. In order to raise funds through an SSE, an NPO must register with the Social Stock Exchange, but it may continue to raise funds through any other means permissible under the law, whether or not it is registered with the Social Stock Exchange. SEBI, in its circular dated September 19, 2022, has prescribed certain minimum requirements for NPOs willing to register on the Social Stock Exchange. The following are the mandatory requirements: i) The NPO should be in existence for a minimum period of 3 years ii) It has a valid certificate u/s 12A/12AA/12AB of the Income Tax Act, iii) It has a valid 80G registration, iv) It has a minimum of INR 50 lakhs in annual spending and v) It had a minimum of INR 10 lakhs in fund in the past year vi) Any other criteria mentioned by the particular Social stock exchange in order to register on them. Investment by investors Under the SSE framework, only institutional investors and non-institutional investors can invest in securities issued by social enterprises. Retail investors can invest only in securities offered by for-profit social enterprises under the Main Board. A lesson from global SSE experience The concept of Social Stock Exchanges is not even two decades old. Globally, SSEs are still at a nascent stage, and there is a lack of detailed research and analysis on the same. Hence, as India gears up to embrace its SSE framework, it has a lot to learn from the global experience. Seven SSEs (Brazil, Portugal, South Africa, Jamaica, the UK, Singapore, and Canada) were set up around the world, of which only three are still operational (Canada, Singapore and Jamaica). One of the ways in which the Indian SSE differs majorly from the other SSEs is that here the initiative came from the government. So while most SSEs around the world failed due to lack of financial resources, in India public funds can be leveraged to fund it in addition to philanthropic contributions, government funding and listing charges.