Zero Coupon Zero Principal Instrument

Zero Coupon Zero Principal Instrument Latest News

Recently, the Ministry of Corporate Affairs (MCA) has allowed companies to deploy a portion of their Corporate Social Responsibility (CSR) spending through Zero Coupon Zero Principal (ZCZP) instruments.           

About Zero Coupon Zero Principal Instrument

• It is a financial instrument issued by a not-for-profit organization which carries neither interest payments nor repayment of principal.
• These financial instruments allow non-profit organizations (NPOs) to raise funds that are listed on the social stock exchange.
• This instrument effectively makes it a philanthropic funding mechanism routed through a market framework.
• ZCZP instruments from NPOs are designated for specific projects or activities and must be completed within the timeframe outlined in the fundraising documents.
• This instrument shall be issued in dematerialized form only.
• It shall not be transferable from the original subscriber/ holder till the expiry of the tenure of the said instrument. 

What is Corporate Social Responsibility?

• It is a business model by which companies make a concerted effort to operate in ways that enhance rather than degrade society and the environment.
• It helps both improve various aspects of society as well as promote a positive brand image of companies.
• CSR is mandatory for eligible companies under Section 135 of the Companies Act, 2013. Companies must spend at least 2% of average net profits of the preceding three years on CSR activities.
• CSR activities are governed by Schedule VII of the Companies Act.

Source: BL

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