LEGAL ENTITY IDENTIFIER CODE
LEI Code is 20 digit alphanumeric code based on the ISO (International Standard Organization) Standard 17442. It enables the accurate identification of the organization involved in financial transactions. It contains various information about the registered entities including the ownership of such entities.
Structure of the LEI Code is- First four numeric digit is the country code, in case of India it is 3358, second two numeric digit is reserved digit and set to two zero, next 12 digits random alphanumeric number and is unique for every organization and last 2 digits is check character based on ISO Standard SO IEC 7064:2003 Information technology — Security techniques — Check character systems, it basically capable of protecting strings against errors which occur when people copy or key data.
(Source of this diagram https://www.ccilindia-lei.co.in/Default.aspx)
BACKGROUND OF LEI CODE
The need for LEI Code came out of the financial crisis 2008=09, the crisis led to the need for additional transparency and regulation in the financial markets. Regulators around the world have been challenged to conduct a systemic risk analysis to understand the aggregate risks of entities and their counterparties across asset classes and markets. Precise and accurate identification of legal entities engaged in financial transactions has, therefore, become critically important for both financial institutions and regulators.
LEI CODE IN INDIAN CONTEXT
At the international level, the LEI Code’s implementation is regulated by the Financial Stability Board (FSB), a supra-national regulatory coordination body. The FSB defined a three-tier structure, consisting of a Regulatory Oversight Committee (ROC), a Central Operating Unit (COU) and Local Operating Units (LOUs), which manage the registration, validation and maintenance of the LEI records. The Central Operating Unit is the main role of the Global LEI Foundation that has been created mid-2014. The Local Operating Units is operating in each county and the Legal Entity Identifier India Limited– A Wholly Owned Subsidiary of The Clearing Corporation of India Ltd. acts as a Local Operating Unit (LOU) for issuing globally compatible Legal Entity Identifiers (LEIs) in India.
LEIL has been recognized by the Reserve Bank of India as an “Issuer” of Legal Entity Identifiers under the Payment and Settlement Systems Act 2007 (as amended in 2015).” LEIL has been accredited by the Global Legal Entity Identifier Foundation (GLEIF) as a Local Operation Unit (LOU) for issuance and management of LEI code.
APPLICABILITY OF LEI CODE IN INDIA
In India, RBI through its various notifications mandated the different entities to obtain LEI Code, these entities include for participants of OTC derivatives markets, through circular dated June 01, 2017, large corporate borrowers, through circular dated November 02, 2017, for participants of non-derivative markets, through circular dated November 29, 2018.
In this write-up, I am focusing on the implementation of LEI Code for large corporate borrowers; the RBI vide notification dated November 2, 2017, issued under Section 21 and Section 35(A) of the Banking Regulation Act, 1949 mandated the banks to make it mandatory for corporate borrowers having aggregate fund-based and non-fund based exposure of ₹ 50 crore and above from any bank to obtain Legal Entity Identifier (LEI) registration and capture the same in the Central Repository of Information on Large Credits (CRILC). This will facilitate the assessment of aggregate borrowing by corporate groups, and monitoring of the financial profile of an entity/group. However, implementation to be done in the phased manner.
| Total Exposure to SCBs* | To be completed by |
| ₹ 1000 crore and above | Mar 31, 2018 |
| Between ₹ 500 crore and ₹ 1000 crore | Jun 30, 2018 |
| Between ₹ 100 crore and ₹ 500 crore | Mar 31, 2019 |
| Between ₹ 50 crore and ₹ 100 crore | Dec 31, 2019 |
*Scheduled Commercial Bank
WHY IS A LEGAL ENTITY IDENTIFIER REQUIRED FOR MY ORGANIZATION
Apart from the fact that it is mandated by the RBI, any organization will require LEI code because Legal Entity Identifier (LEI) is a global reference number that uniquely identifies every legal entity or structure that is a party to a financial transaction, in any jurisdiction. LEIL will assign LEIs to any legal identity including but not limited to all intermediary institutions, banks, mutual funds, partnership companies, trusts, holdings, special purpose vehicles, asset management companies and all other institutions being parties to financial transactions. LEI will be assigned on application from the legal entity and after due validation of data. For the organization, LEI will
- Serve as a proof of identity for a financial entity
- Help to abide by regulatory requirements
- Facilitate transaction reporting to Trade Repositories
Documents required for the registration of the enterprise and its submission.
In the case of Public Company following documents will be required.
1. Certified True Copy of the Resolution of the Board on the letterhead of the company signed by the Company Secretary or where no Company Secretary is available then by the Managing Director or any other director.
2. Power Of Attorney, however, no POA is required in the case where official mentioned in Board Resolution mentioned above is applying for LEI and no delegation further of power is taking place. The execution date of the power of attorney shall be the date of franking of the document /stamp paper or date greater than the franking date/ issue of stamp paper. The validity of the franking/stamp paper is six months from the date of franking/stamp paper.
3. Undertaking cum Indemnity bond, executed on the date of franking of the document /stamp paper or date greater than the franking date/ issue of stamp paper. The validity of the franking/stamp paper is six months from the date of franking/ stamp paper.
4. Other documents to be submitted along with Undertaking cum indemnity are Certificate of Incorporation, MCA master data, PAN Card of the Company, Latest Annual Report, and Audited Financial Statement of the Direct and Ultimate Holding if any.
5. Statutory Auditor’s certificate for relationship data i.e. certificate certifying the information about holding and ultimate holding company.
All these documents need to be submitted online, by first creating a Login ID and then uploading all these documents. Payment to be made as per the prescribed amount.
The growth of LEI is very important for the business community since LEI enables a clear and unique identification of legal entities participating in financial transactions by connecting to key reference information and to maximize the benefits of entity identification across financial markets and beyond, firms are therefore encouraged to engage in the process and get their own LEI. Obtaining an LEI is easy by following the above-mentioned procedure.
Associate Company Secretary Mobile No. 9899864768 E-mail; csnishantmishra@yahoo.com
Author Bio
Sir, Our company is a corporate borrowers having aggregate fund-based and non-fund based exposure of ₹ 25 crores. Do we need to obtain LEI. If yes which phase of registration is going on at present and by what time it should be completed.