Under the Companies Act, 2013, a certain class of profitable companies are required to shell out at least two per cent of their three-year average annual net profit towards CSR (Corporate Social Responsibility) activities in a particular financial year.
The corporate affairs ministry has introduced the item ‘subscription to zero coupon zero principal instruments on Social Stock Exchange’ in Schedule VII, which pertains to activities allowed for CSR activities under the Companies Act.
“This amendment is aimed at providing significant ease of compliance to the companies and will also help Not for Profit Organisations (NPOs), to raise funding for public welfare projects in a transparent and regulated manner.
“These NPOs will be able to issue zero-coupon, zero-principal instruments on the Social Stock Exchange (SSE) in accordance with the Securities and Exchange Board of India’s Regulations,” the ministry said in a release on Friday.
Expenditure incurred by the CSR-mandated companies for such instruments shall not exceed ten per cent of the total CSR expenditure for the particular financial year.
To facilitate the implementation of CSR through zero coupon zero principal instrument, amendments have been done in the CSR Policy Rules, 2014.Now, under the rules, the definition of NPO and zero coupon zero principal instrument’ has been introduced.
Anshul Jain, Partner Regulatory at consultancy PwC India, said companies can now invest their CSR funds into such instruments issued through an SSE.
It helps in furtherance of a transparent and credible mode of funding CSR projects by the companies and enables social enterprises to access a wider pool of capital, Jain said.