CSR Through Social Stock Exchange: Analysis of MCA’s 2026 Amendment Introducing Zero Coupon Zero Principal (ZCZP) Instruments

CSR Through Social Stock Exchange: Analysis of MCA’s 2026 Amendment Introducing Zero Coupon Zero Principal (ZCZP) Instruments

The Ministry of Corporate Affairs amended Companies (Corporate Social Responsibility Policy) Amendment Rules, 2026, which came into effect on May 27, 2026.

The CSR Amendment came into existence with an objective to allow companies to undertake CSR Spending through Zero Coupon Zero Principal (ZCZP) instruments issued by eligible not for profit organisations on the Social Stock Exchange.

The amendment Introduces two major definitions into Rule 2:

• Not for Profit Organisation
• Zero Coupon Zero Principal

Companies (Corporate Social Responsibility Policy) Amendment Rules, 2026

“Not for Profit Organization” has the same meaning as in clause (e) of regulation 292A of the Securities Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018.

“Zero coupon zero principal instrument” means an instrument declared as a security and issued by a Not for Profit Organization registered with the Social Stock Exchange segment of a recognised stock exchange in accordance with the Regulations made by Securities and Exchange Board of India”.

A New Rule inserted in CSR Rules i.e 4A “ Corporate Social Responsibility implementation through zero coupon zero principal instrument. It provides that a company can carry out CSR activities through a zero coupon zero principal instrument. However, expenditure incurred for such an instrument shall not exceed 10% of total CSR expenditure of such company for that financial year.

Conditions applicable for issuing NPOs:

The NPOs can raise funds by:

1. undertaking a project with a duration not exceeding three succeeding financial years from the issuance of such instrument; and
2. on termination of the listing of the instrument, transfer any unspent amount to a fund included in Schedule VII to the Companies Act, 2013 and submit the compliance report to SEBI.

 Key Restrictions:

The amount spent through ZCZP instruments cannot exceed 10% of the company’s total expenditure for the financial year.

Purpose of the Amendment:    

1. aimed at providing significant ease of compliance to the companies.
2. to raise funding for public welfare projects in a transparent and regulated manner.
3. Reduce the burden on companies. Now companies investing through zczp are exempt from conducting impact assessment for those specific Projects.
4. Expansion of schedule VII by adding subscription to ZCZP instruments on Social Stock Exchange.
5. Create an additional Channel for CSR funding.

MCA Amendment: What changed?
Before the amendment
CSR funding was generally made through:

• contributions to eligible funds or
• Implementing agencies or
• Direct implementation by the Company.

After the amendment
Companies can now undertake CSR expenditure by subscribing to ZCZP instruments on the SSE, subject to 10% cap.

Computation of 10% Cap

Illustration 1
CSR obligation = 2 Crore
ZCZP Investment= 20 Lakh (10% of 2 Crore)
Remaining CSR expenditure= 1.80 Crore (2 Crore- 20 Lakh)

Illustration 2
CSR obligation = 5 Crore
ZCZP Investment = 50 Lakh (10% of 5 Crore)
Remaining CSR expenditure = 4.5 Crore (5 Crore- 50 Lakh)

Disclosure
The expenditure through ZCZP instruments should form part of the Board Report and Annual CSR Report in accordance with the Companies Act, 2013 and the CSR Rules.

Key Takeways

• Companies can now undertake CSR expenditure through ZCZP instruments
• Such restriction is subject to 10% of CSR obligation.
• The amendments promotes transparency and accountability.
• Ease of Compliance in CSR spending.
• Any unspent amount must be transferred to Schedule VII funds.
• Project funded by ZCZP instruments cannot exceed 3 succeeding financial years.