Govt. declares ‘zero coupon zero principal’ (ZCZP) as securities

The Finance Ministry has declared zero coupon zero principal instruments (ZCZP) as securities.

Key highlights

• This will help many organizations including corporates to utilize their fund marked for social responsibility and also help non-profit organisations to get funds in a more transparent manner.

• Neither any interest is paid nor principal is repaid under ZCZP.

• A gazette notification issued by the Ministry said: “Zero Coupon­ Zero Principal instrument means an instrument issued by a not ­for­ profit organization which shall be registered with the social stock exchange (SSE) segment of a recognized stock exchange in accordance with the regulations made by the Securities and Exchange Board of India (SEBI).”

• The notification also declared the inclusion of ZCZP in the list of securities under the Securities Contracts (Regulation) Act, 1956.

• This list included shares, scrips, stocks, bonds, debentures, debentures or other marketable securities, derivatives, units or any other instrument issued by any collective investment scheme, security receipt, mutual fund units (excluding ULIPs), units issued by any pooled investment vehicle and government securities.

• These securities can be traded on a recognized stock exchange and the trading can be regulated by SEBI.

Benefits

• This move is going to benefit both — one who wants to donate and one who wants to raise money for social causes.

• For example: A corporate that is mandated to use a part of its profit for Corporate Social Responsibility (CSR) activity. It will now get an instrument to invest.

(Source: BL)

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