Mandatory Requirement To Obtain Legal Entity Identifier (LEI) Code Pursuant To RBI Circulars/ Instructions

Legal Entity Identifier (LEI) is a 20-character unique code which every company is required to obtain who are parties to financial transactions.  The concept of LEI and its deadlines are issued pursuant to RBI circulars dated 29.11.2018 vide web link https://taxguru.in/rbi/legal-entity-identifier-code-participation-non-derivative-markets.html & dated 26.04.2019 vide web link https://www.rbi.org.in/Scripts/NotificationUser.aspx?ID=11547. Most of the entities are still unaware about the concept of LEI code. Here are some key points mentioned below to provide the overview of this vide concept issued by RBI.

> Who are required to obtain the LEI code? 

As per RBI Circular No. RBI/2018-19/83 dated 29.11.2018; all participants, other than individuals, undertaking transactions in the markets regulated by RBI viz., 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) shall obtain Legal Entity Identifier (LEI) codes by the due date indicated in the schedule given below:

Schedule for Implementation of LEI in the Money market, G-sec market and Forex market: 

Phase Net Worth of Entities Proposed deadline
Phase I above Rs.10000 million April 30, 2019
Phase II between Rs.2000 million and Rs 10000 million August 31, 2019
Phase III up to Rs.2000 million March 31, 2020

Note: Please refer extension Notification issued by RBI Vide no. RBI/2018-19/177 dated 26.04.2019

> Is it mandatory to obtain the LEI code? If so, then why?

Yes, It is mandatory for all legal entities to obtain LEI Code which

> How to obtain the same?

LEI code may be obtained from Legal Entity Identifier India Ltd. (LEIL) (https://www.ccilindia-lei.co.in)

> Documents required:

As per LEIL department following are the documents required for obtaining LEI code:

a) Certificate of Incorporation/Registration Certificate

b) PAN Card proof

c) Undertaking –cum-Indemnity as per the format specified by LEIL

d) Audited Financial Statements

e) Board Resolution as per the format specified by LEIL OR A certified true copy of the general board resolution or general power of attorney will be accepted if the legal entity commits to submit a fresh board resolution in the format as prescribed by LEIL when the next Board Meeting is held subsequently.

f) Power of Attorney as per the format specified by LEIL in case of any further delegation by officials mentioned in Board Resolution.

g) 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.

> Validity of the code

LEI code is valid for one Year from the date of issue of code. 

> Consequences of not obtaining LEI code

Entities without an LEI code would not be eligible to participate in the OTC derivative markets, Government securities markets, money markets  and non-derivative forex markets if the code will not be obtain till the due date specified in schedule mentioned above. 

Disclaimer:– The above article is drafted on the basis of Notifications and circulars issued by RBI from time to  time which are mandatory to comply with. At the time of making compliances, there are other important aspects also which are required to be considered while preparing them as cases varies and depend upon merits of the company’s profile. Hence, the professional/(s) who are involved should consider the whole case. The author shall not liable for any direct, indirect, special or incidental damage resulting from, arising out of or in connection with the use of the information.

[Author – CS Charu Aggarwal, Charu A & Associates, Practising Company Secretary in Chandigarh and Delhi; provides varied array of services including Start-ups, Secretarial, Legal, Intellectual property, taxation, Audit, GST, Book keeping and other ancillary advisory service and can be reached at email id:- caggarwalpcs@gmail.com or +91 9877907702]

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Location: Chandigarh, Chandigarh, IN
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2 Comments

    1. Charu Aggarwal says:

      If the company is dealing in derivative market then yes company is required to take LEI code from LEIL department which is authorised by RBI.

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