INTRODUCTION AND PURPOSE OF LEGAL ENTITY IDENTIFIER
The Legal Entity Identifier (LEI) code is conceived as a key measure to improve the quality and accuracy of financial data systems for better risk management post the Global Financial Crisis.
The LEI is designed to enable the identification and linking of parties to financial transactions to manage counterparty risk. Its goal is to help improve the measuring and monitoring of systemic risk and support more cost-effective compliance with regulatory reporting requirements.
REGULATORY AUTHORITY OF LEI
The Global LEI System (GLEIS) has been set up by regulatory authorities [including G20 and the Financial Stability Board (FSB)] to address the global financial crisis. The online portals of the Financial Stability Board (FSB), Regulatory Oversight Committee and Global Legal Entity Identifier Foundation provide general information on the status of the global LEI system.
STRUCTURE OF LEI CODE
LEI is a 20-digit unique code to identify parties to financial transactions worldwide. It consists of long alphanumeric code based on the ISO 17442 standard developed by the International Organization for Standardization (ISO) and has the following structure:
- Characters 1-4, a four-character prefix assigned by the ROC Secretariat, unique to each Local Operating Unit (LOU) (for LEIL–3358)
- Characters 5-6, 2 reserved characters – 00
- Characters 7-18, 12 characters generated and assigned to an entity by the LOU according to transparent and sound allocation policies
- Characters 19-20, 2 check digits under ISO 17442
WHO NEEDS TO APPLY FOR LEI CODES?
1. RBI Circular for NEFT/RTGS Transactions:
- In accordance with the latest RBI circular dated January 05, 2021, the RBI states that LEI Number is required for all payment transactions of value of INR 50 crore and above undertaken.
- In case you are using RTGS/NEFT for carrying out transactions of value 50 crores or above for FX Payments, Money Market Payments, Vendor Payments, Inter-company payments or any other, the LEI number would be required.
2. IRDAI Circular for Insurers and corporate borrowers (IRDAI circular dated June 05, 2020):
The IRDAI circular is applicable to both term loan borrowers and debenture issuers. Debentures, term loans as well as Bonds, both would be included in computing the overall exposure that an insurer or financial institution has to be a corporate borrower either in the form of term loan or debentures or in any other form of debt.
3. RBI Circular for Non derivatives markets and for Large Borrowers
The RBI Circular covers participants in a non-derivative markets and borrowers of banks in a phased manner to apply for an LEI.
Non-derivative markets include Government securities markets, money markets (markets for any instrument with a maturity of one year or less) and non-derivative forex markets (transactions that settle on or before the spot date) that is cash, tom and spot transactions.
4. Remaining Participants as per Reserve Bank of India has mandated the implementation of the LEI System
All participants in the Over the Counter (OTC) markets for Rupee Interest Rate derivatives, foreign currency derivatives and credit derivatives in India, in a phased manner as mentioned below: –
1. Phase I – Entities regulated by RBI / SEBI / IRDA / PFRDA and Corporates with Net Worth above Rs 10000 mn- August 1, 2017
2. Phase II – Corporates with Net Worth between Rs 2000 mn and Rs 10000 mn-August 1, 2017
3. Phase III – Corporates with Net Worth between Rs 700 mn and Rs 2000 mn- December 1, 2017
4. Phase IV – Corporates with Net Worth of Rs 700 mn and below- March 31, 2018
Please note that entities without an LEI code would not be eligible to participate in the OTC derivative markets, after the date specified in the schedule.
THE PROCESS TO APPLY FOR AN LEI: –
A legal entity seeking an LEI will be required to register as a user on our LEI website (i.e. www.ccilindia-lei.co.in).
The authorized official will select the option to “Create an Account” and fill in the required details. The officials will receive a confirmation e-mail to activate and verify his/her account.
“An LEI is valid for one year from the date of issuance/last renewal date.”
The following are the steps to apply for an LEI:
1. First visit the LEIL website with the help of link i.e., https://www.ccilindialei.co.in.
2. Then, go to Download Tab and download the documents under Tab “Legal Doc Download”. You will be able to download the list of documents and formats for LEI application.
- The applicant who is authorized by the board will create an online account.
1. The applicant will submit the online registration form and makes the payment
2. The entity will be required to upload the necessary documents on the online form.
3. In this case legal entity is unable to upload documents the entity has to courier the
required physical documents to LEIL.
- LEIL will verify the documents received, payment and the online form.
- LEI number is issued.
After upload of documents & payment, it takes generally 3 to 5 working days to issue an LEI.
DOCUMENTS REQUIRED TO BE SUBMITTED TO LOU FOR PROCESSING LEI APPLICATIONS
The legal entity after creating an account will go to “Information” Tab and select “Legal Doc Download”. The list of documents for each legal form is available for download which include but not limited to:
- Certificate of Incorporation/Registration Certificate
- PAN Card proof
- Undertaking-cum-Indemnity as per the format specified by LEIL
- E-stamp paper
- Audited Financial Statements
- Board Resolution as per the format specified by LEIL OR A certified true copy of the general board resolution or general power of attorney
- Power of Attorney as per the format specified by LEIL
- Audited financials of Holding and Ultimate Parent or Auditor’s Certificate as per the format specified by LEIL in case of holding company and ultimate parent
WHAT IF APPLICATION FOR LEI WAS REJECTED: –
In the event the validation team finds your requested pre-LEI/LEI either to be a duplicate or to have an inaccurate information included in your record; then in both the cases, no LEI will be published.
The accurate reason of refusal will be communicated to the applicant over the e-mail as well as phone call.
In case your application is not processed after 6 months of the payment date or in case of rejection, LEI Authority will initiate refund of application amount.
FAQ’s (FREQUENTLY ASKED QUESTIONS)
Q.1 I have obtained LEI for my Company for one kind of securities so, do I have to apply for LEI number again?
Reply: No, LEI number is a globally unique number assigned to your company. For example- The same LEI number is also valid for credit as well as in non-derivatives markets.
Q.2 Can an individual apply for LEI?
Reply: No, an individual acting in natural capacity is currently out of scope to apply for LEI.
Q.3 If Company registered office is moving abroad. Do I need to apply for new LEI?
Reply: No, an issued LEI retains its validity even if the entity moves into the area of responsibility of a different issuing agency if the legal entity remains the same.
Q.4 What is the validity period of an LEI?
Reply: An LEI is valid for one year from the date of issuance/last renewal date.
Q.5 Where can I find out the renewal date for my existing LEI?
Reply: The legal entity must search the LEI in search tab. The user shall click on “View Details” which provide the “LEI Next Renewal Date”.
Q.6 What happens if I don’t renew my LEI?
Reply: The LEI shall be valid for a term of one year after assignment or renewal. It shall be the duty of the entity to apply for renewal of LEI before expiry of the validity of the LEI. The status of your LEI will change to ‘LAPSED’ on the next renewal date.
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{The author i.e., Mrs. Kajal Goyal is a Company Secretary in Practice at M/s. Kajal Goyal and Associates and can be reached at (M) +91-9999952595 and (E) [email protected]}
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