Social Stock Exchange Instruments Added to CSR Eligible Activities

New Delhi, May 30 (KNN) The government has widened the scope of Corporate Social Responsibility (CSR) by allowing companies to subscribe to 'zero coupon zero principal' instruments listed on the Social Stock Exchange.

The Ministry of Corporate Affairs (MCA) in a statement said it has widened the ambit of Schedule VII of the Companies Act 2013 by introducing a new item “Subscription to zero coupon zero principal instruments on Social Stock Exchange."

In order to further implementation of CSR through zero coupon zero principal instrument, the MCA has also amended the CSR Rules, 2014. Accordingly, the definition of ‘Not for Profit Organization’ and ‘Zero Coupon Zero Principal Instrument’ has been introduced for implementing CSR projects.

"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," the MCA said.

Expenditure incurred by the CSR mandated companies for zero coupon zero principal instruments has been capped at 10% of the total CSR spending for that financial year.

With these amendments, the NPOs will be able to issue zero coupon zero principal instruments on the Social Stock Exchange (SSE) in accordance with the market regulator SEBI's regulations.

Commenting on the development, Sriram Krishnan, Chief Business Development Officer at National Stock Exchange (NSE) said that the move would enable corporates to deploy CSR funding through a transparent.

The amendment is expected to make it easier for NPOs to access corporate funding through the Social Stock Exchange. It will also improve transparency, encourage outcome-oriented social spending, and help build greater trust in the social impact ecosystem.

Finance Minister Nirmala Sitharaman had in Budget 2019-20 proposed the idea of creating an electronic fund-raising platform – a social stock exchange - under the regulatory ambit of SEBI for listing social enterprises and voluntary organizations to raise capital as equity, debt or as units like a mutual fund.

(KNN Bureau)