Companies Can Now Meet CSR Obligations Through Zero Coupon Zero Principal (ZCZP) Instruments

The Ministry of Corporate Affairs (MCA) has notified the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2026 (“Amendment Rules”), introducing a significant change to the CSR framework under the Companies Act, 2013 (“Act”). 

Under the Amendment Rules, companies can now use a portion of their mandatory CSR spending to subscribe to Zero Coupon Zero Principal (“ZCZP”) instruments (described below), issued by eligible not-for-profit organizations (“NPOs”). 

What are ZCZP Instruments? 

A ZCZP instrument is a listed security issued by an NPO registered on the Social Stock Exchange. It pays no interest and returns no principal and is akin to a market-based mechanism for funding verified social projects. 

Cap on total CSR expenditure  

Such investments are subject to a cap of 10% of a company's total CSR expenditure in a given financial year. 

Exemption from Impact Assessment 

As a practical benefit, CSR projects funded through ZCZP instruments are exempt from the impact assessment requirement that would otherwise apply. Under the existing rules, larger companies (those with an average CSR obligation of ₹100 million or more) must commission independent impact assessments for projects above ₹10 million. That obligation does not apply here. 

What Counts as an NPO? 

Eligible NPOs include charitable trusts, societies registered under applicable state or central laws, and Section 8 companies — essentially, any recognized not-for-profit entity that SEBI may designate. They must be registered with the Social Stock Exchange segment of a recognized stock exchange. 

Obligations on the NPO 

NPOs that raise funds through ZCZP instruments must: 

• Complete their funded projects within three financial years of the instrument's issuance date;

• Transfer any unspent funds to a Schedule VII-designated fund once the instrument's listing ends, and file a compliance report with SEBI. 

Amendment to Schedule VII of the Act 

Schedule VII of the Act has also been amended to expressly list ZCZP instrument subscriptions as an eligible CSR activity, giving companies regulatory certainty when using this route. 

Conclusion 

The amendment creates an additional avenue for companies to deploy CSR funds while enabling eligible NPOs to access funding through the capital markets ecosystem. While the 10% cap ensures that ZCZP instruments remain a supplementary CSR mechanism, companies may find this route attractive due to its structured framework, regulatory oversight and exemption from impact assessment requirements.