Zero Coupon Zero Principal (ZCZP) instrument

A ZCZP instrument looks like a bond and behaves like a donation.

A normal bond promises two things: interest (the coupon) and your money back at maturity (the principal). A ZCZP promises neither. It carries zero coupon and repays zero principal. The funder gives money to an NPO's specific project and gets nothing financial back.

So why is it a security at all? Because it keeps the essential quality of a promise that can be defaulted on. The NPO promises a social return — a defined project delivered within a defined time. If it fails, the funder is disappointed, the NPO loses trust, and its ability to raise money next time suffers. That consequence for the defaulter is what makes it an instrument rather than a gift.

ZCZP instruments were notified as securities under the Securities Contracts (Regulation) Act, 1956 with effect from July 15, 2022, which is what allows them to be listed and traded on a stock exchange segment.

Who may issue (Regulation 292I and 292J of ICDR): only a Not for Profit Organisation registered on a Social Stock Exchange. The instruments carry a specific tenure.

For what: only a specific project or activity that falls within the eligible activities listed in Regulation 292E, to be completed within the duration stated in the fundraising document.

To whom:

• the public, through a public issue, which must comply with Rule 19 of the Securities Contracts (Regulation) Rules, 1957; or
• Social Impact Funds registered under the SEBI (AIF) Regulations, through a private issue. The public-issue provisions apply to this mutatis mutandis.

Tenure and maturity. A ZCZP is listed on the SSE with a tenure equal to the duration of the project it funds. At maturity it is written off the investee's books.

When the listing ends: either (a) the object is achieved and a certificate to that effect is submitted to the SSE, or (b) the tenure in the fundraising document expires.

Credibility. The NPO must show expertise in the targeted area through the social performance of past projects.

How donors bid. A Chapter 10 footnote says NSE SSE lets donors bid for ZCZP instruments on the e-IPO platform, through SCSBs and syndicate members with 3-in-1 accounts, from ₹10,000, and avail 80G benefits.

CSR through ZCZP. Chapter 1 says MCA permits companies to spend CSR through ZCZP, but not more than 10% of total CSR expenditure for that financial year.

The issuer (illustrative). Shiksha Deep Trust, registered on NSE SSE, lists a ZCZP issue of ₹80 lakh to build girls' toilets and run menstrual-hygiene sessions in 40 government schools in Barmer. The tenure is 24 months, the stated project duration. Promoting sanitation and gender equality are both eligible activities.

A retail donor. Rekha, a teacher in Jaipur, bids ₹10,000 — the e-IPO minimum the workbook cites — through her broker. She receives the instruments in her demat account. She gets no interest and no redemption, and she may claim her 80G deduction if the trust's 80G registration is valid on the date of her contribution.

A corporate donor. Marudhar Cements Ltd has a CSR budget of ₹6 crore this year. Under the Chapter 1 rule, at most 10% × ₹6 crore = ₹60 lakh can go through ZCZP instruments. It subscribes ₹50 lakh — inside the cap.

At the end. At month 22 the trust certifies to the SSE that all 40 toilets are built and the sessions held. The listing terminates because the object is achieved. The instruments are written off the trust's books. Shiksha Deep's Annual Impact Report, assessed by a Social Impact Assessment Organisation, tells Rekha and Marudhar whether their social return was actually delivered.

Had the project stalled, the listing would still terminate when the 24-month tenure expired. The "default" would show up in the impact report, and in the trust's next fundraise.

ZCZP runs through Chapter 1 (the CSR route and 10% cap), Chapter 2 (2.3.1.3 — Regulations 292I and 292J, public and private issue, termination of listing) and Chapter 9 (minimum initial disclosures under Regulation 292K). Chapter 10's footnote adds the e-IPO facility. It is the defining NPO instrument, so expect questions on who may issue it, to whom, its tenure, when its listing terminates, and the date it became a security.

• Only an NPO registered on an SSE can issue ZCZP. Not an FPSE, and not an unregistered NPO.
• Zero coupon zero principal means no interest and no repayment. "The principal is returned at maturity" is false; the instrument is written off.
• Tenure = project duration. Not a fixed term such as 5 years.
• Private issue goes only to Social Impact Funds.
• Notified as securities under SCRA, 1956 w.e.f. July 15, 2022.
• The 10% CSR cap is of total CSR expenditure, not of net profit and not of the CSR obligation's 2%.
• Possible stale figure — flag. The 10% cap is stated in Chapter 1. A Chapter 2 footnote says that in May 2026 the Ministry of Corporate Affairs amended the CSR Rules to add NPO and ZCZP definitions and introduced Rule 4A to enable CSR through ZCZP. The workbook does not say whether Rule 4A changes the 10% cap. Teach the workbook's 10%, and check the current CSR Rules before relying on it outside the exam.