MCA Amends CSR Framework for ZCZP Instruments

The Ministry of Corporate Affairs (MCA), through a press release dated May 29, 2026, announced amendments to Schedule VII of the Companies Act, 2013 and the Companies (Corporate Social Responsibility Policy) Rules, 2014. The amendments provide for Corporate Social Responsibility (CSR) implementation through Zero Coupon Zero Principal Instruments (ZCZP). The aim is to facilitate ease of compliance for companies and to help Not for Profit Organisations in raising funding for public welfare projects in a transparent and regulated manner.

Section 135 of the Companies Act, 2013, Schedule VII of the Act and the Companies (Corporate Social Responsibility Policy) Rules, 2014 provide the legal framework governing CSR.

For context, SEBI had issued a consultation paper in relation to easing fundraising by Not for Profit Organisations through Social Stock Exchanges, including changes relating to Zero Coupon Zero Principal Instruments and registration requirements for eligible organisations.

Amendment to Companies Act, 2013

Schedule VII of the Companies Act, 2013 has been amended and a new item (xiii), “Subscription to Zero Coupon Zero Principal Instruments issued by a Not-for-Profit Organisation and listed on the Social Stock Exchange,” has been added. Schedule VII sets out the activities that companies may undertake to fulfill their CSR obligations and is aimed at promoting inclusive and sustainable development.

Companies (Corporate Social Responsibility Policy) Amendment Rules, 2026

“Not for Profit Organisation” shall have the same meaning as assigned under Regulation 292A(e) of the SEBI (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 Organisation registered with the Social Stock Exchange segment of a recognised stock exchange in accordance with the Regulations.

A new Rule 4A titled “Corporate Social Responsibility implementation through zero coupon zero principal instrument” has been inserted into the CSR Rules. The Rule provides that a company may carry out CSR activities through a ZCZP Instrument. However, expenditure incurred for such an instrument shall not exceed ten percent of the total CSR expenditure of the company for that financial year.

Rule 4A also provides that a company subscribing to a ZCZP Instrument shall not be required to undertake an impact assessment in terms of Rule 8(3) of the CSR Rules in respect of projects funded through such an instrument.

Further, the Rule provides that the provisions of Rule 4 of the CSR Rules, except sub-rules (5) and (6), shall apply to the implementation of CSR through a ZCZP Instrument.

Conditions Applicable to Issuing NPOs

The Rules provide that a Not for Profit Organisation issuing a ZCZP Instrument and raising funds therefrom shall:

• undertake a project with a duration not exceeding three succeeding financial years from the issuance of the instrument; and
• upon 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.