The MCA has notified new CSR amendment rules, allowing companies to use ‘Zero Coupon Zero Principal Instruments’ on Social Stock Exchanges for CSR activities. This is capped at 10% of CSR spend and exempts impact assessment for such projects.
The Ministry of Corporate Affairs (MCA) has notified the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2026, enabling companies to undertake Corporate Social Responsibility (CSR) activities through “Zero Coupon Zero Principal Instruments” (ZCZP Instruments) listed on Social Stock Exchanges. The amendments came into force on May 27, 2026, the date of their publication in the Official Gazette.
Key Provisions of the Amendment
Under the amended rules, a “Not for Profit Organisation” (NPO) will have the same meaning as assigned under Regulation 292A of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018.
The notification also introduces a definition for “Zero Coupon Zero Principal Instrument”, describing it as a security issued by an NPO registered with the Social Stock Exchange segment of a recognised stock exchange in accordance with SEBI regulations. The newly inserted Rule 4A allows companies to implement CSR projects through such instruments.
Expenditure and Assessment Rules
However, expenditure on Zero Coupon Zero Principal Instruments cannot exceed 10 per cent of a company’s total CSR expenditure for the relevant financial year. The amendment further provides that companies subscribing to these instruments will be exempt from conducting impact assessments for projects funded through them.
Project Timelines and Fund Management
According to the notification, NPOs issuing Zero Coupon Zero Principal Instruments must undertake projects with a duration not exceeding three succeeding financial years from the date of issue.
In addition, upon termination of the instrument’s listing, any unspent amount must be transferred to a fund specified under Schedule VII of the Companies Act, 2013, and a compliance report must be submitted to the Securities and Exchange Board of India (SEBI).
The notification also clarified that the provisions of Rule 4 of the CSR Rules, except sub-rules (5) and (6), will apply to CSR implementation through Zero Coupon Zero Principal Instruments.
The amendment seeks to facilitate greater participation of companies in social sector projects through Social Stock Exchange-listed instruments while establishing safeguards regarding utilisation of funds and project timelines. (ANI)
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