MCA amends Schedule VII and CSR Policy Rules to permit zero coupon zero principal instrument subscriptions, capped at 10% of annual CSR spend
CSR-mandated companies may now subscribe to ZCZP instruments on the Social Stock Exchange as eligible CSR spend, subject to a 10% annual cap; NPOs issuing such instruments must accept project execution and evaluation responsibility under Rule 4A.
Change
The MCA amended Schedule VII of the Companies Act, 2013 and the CSR Policy Rules, 2014 via gazette notifications dated 27 May 2026 to add ZCZP instrument subscriptions as eligible CSR activity under item (xiii), capped at 10% of a company's total annual CSR expenditure, with NPO issuers bound by Rule 4A execution and evaluation obligations.
Why it matters
The amendment creates a new CSR funding channel: companies subject to Section 135 CSR obligations may direct up to 10% of annual CSR spend to ZCZP instruments issued on the Social Stock Exchange. The 10% ceiling is a hard compliance boundary — allocations above it do not qualify as CSR expenditure. NPOs seeking to raise funds through ZCZP instruments must meet Rule 4A criteria, including assumption of full project execution and evaluation responsibility, and must comply with SEBI's SSE regulations for issuance eligibility.
Implications
- — CSR compliance teams at Section 135-mandated companies must cap ZCZP instrument subscriptions at 10% of total annual CSR expenditure — allocations above that threshold do not constitute valid CSR spend under the amended Rules.
- — Not-for-profit organisations intending to raise funds via ZCZP instruments on the Social Stock Exchange must satisfy Rule 4A criteria — including accepting project execution and evaluation responsibility — before issuance; non-compliance with Rule 4A disqualifies the instrument from CSR eligibility.
- — NPOs issuing ZCZP instruments must comply with SEBI's Social Stock Exchange regulations as a condition of listing — non-compliance with SSE regulations blocks issuance eligibility regardless of Rule 4A compliance.
Who is affected
- — CSR compliance and finance teams at Section 135-mandated companies managing annual CSR allocations
- — Not-for-profit organisations seeking to raise funds via ZCZP instruments on the Social Stock Exchange