Context: SEBI has unveiled a roadmap for public issuance of 'Zero Coupon Zero Principle' instruments by not-for-profit organisations (NPOs) and listing of such instruments on the Social Stock Exchange (SSE).
Zero Coupon Zero Principal Instruments
- These are financial instruments using which any non-profit organisation (NPOs) can raise funds which are listed on the social stock exchange.
- Usually, NPOs raise money through donations or CSR initiatives of individuals and corporates. Thus, those willing to donate money to NPOs, can buy these securities listed on SSEs.
- ZCZP instruments are structured like a bond. In a regular bond, the entity raising money using a bond, has to make interest payments and principal payments when the bond matures. However, the ZCZP is issued by an entity not raising loans but donations. Thus, the ZCZP issuing entity does not have to pay interest (zero coupon) and does not have to pay the principal (zero principal) either.
- ZCZP instruments issued by a NPO can be issued only for a specific project or activity to be completed within a duration specified in fund raising document.
- Central Government (Ministry of Finance) has declared Zero Coupon Zero Principal instruments as securities under the Securities Contracts (Regulation) Act, 1956 in 2022.
Regulations for issuing of Zero Coupon Zero Instruments by SEBI
- Minimum issue size for ZCZP instruments is Rs 50 lakhs.
- Minimum application size has been kept at Rs 10,000.
- Minimum subscription required to be achieved will be 75% of the funds proposed to be raised through the issuance of such instruments. Funds will be refunded in case subscription is less than 75% of the issue size.
- ZCZP can be issued only in dematerialised form
- ZCZP are non-transferable.
- ZCZP instruments will be listed on Social Stock Exchange.
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