On December 5, 2012, the Reserve Bank of India introduced a number called the Legal Entity Identifier to track financial transactions exceeding ₹50 million. This number will become effective on April 1, 2021.
The LEI 20-digit number can be useful for identifying financial transaction parties worldwide. It will improve the accuracy and quality of data systems in the economic niche to better manage risk after the global financial crisis. Without waiting, let's check the purpose of an LEI number and its legitimacy and find out who can apply for it.
Did you know?
The RBI has updated its guidelines to advise member banks that entities undertaking large-value transactions (₹50 crores and more) should obtain LEI as soon as possible. In RTGS or NEFT payments messages, member banks must also include information about the beneficiary and remitter LEI. They should also keep records of transactions above ₹50 crores through RTGS or NEFT.
Also Read: GST Unique Identification Number
What Exactly Is an LEI Number?
LEI (also known as Legal Entity Identifier) is a unique identifier for individuals who are legal entities, such as trusts, charities and companies. The Legal Entity Identifier ( LEI) is an alpha-numeric, 20-character code that allows you to identify legal entities involved in financial transactions.
The registered LEI number is a source of the following details about the entity:
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The legal entity's official title is registered in the official registry.
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The registered address of this legal entity.
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The place of formation.
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The codes allow for the representation of the names of countries and their subdivisions.
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When the date was assigned for the initial LEI assignment, the last update of LEI information and the date on which the LEI expires.
What is the Legitimacy of the LEI Number?
LEIs will be given to companies with a validity time of one year. Then, it has to be renewed every year. The good news is that LEI Registration can be extended for five years, and automatic renewal is available at the end of each year. This means that the registration will be renewed automatically following the year's expiration, and there's no need to renew it each year.
Background
This financial meltdown has highlighted the need for greater regulatory transparency within the financial market. Regulators from all over the world are being asked to conduct a systemic risk analysis to comprehend the risks shared by the entities and their counterparties across all asset types and the markets.
The precise and accurate recognition of legitimate entities involved in financial transactions has become vital for financial regulators and institutions. A key element in allowing regulators to conduct these risk assessments is establishing a global Legal Entity Identifier and the primary attributes of a record and a system to assist it. This will require adopting an internationally reliable, recognised LEI solution. In a rigorous ISO development process, a brand new standard of LEI was created, and ISO Standard 17442 was developed and released to the public on May 12, 2012.
Also Read: How To Get A Business License In India?
Who Can Apply for the LEI code?
Anyone who is a legal entity has the right to be eligible to request one LEI code. These codes are legally necessary for legal entities carrying financial transactions or working in the banking system. Particularly legal entities that operate in Europe, the UK, the EU and the US will likely need an LEI. In many instances, a legal entity is denied trading if it cannot obtain an LEI, and LEI numbers are necessary.
There are about 100 regulations across different jurisdictions in which there is a requirement for the usage of LEI codes. A few of the types of legal entities that may be required to possess an LEI are:
- Financial intermediaries
- Companies that invest in lenders and banks
- Trade OTC derivatives (excluding private individuals)
- Self-Managed Superannuation Funds trustees and traders
- Investment vehicles, mutual funds, hedge funds
- Pension schemes
- Commodities trading
- CFDs (Contract for Differences)
- Transactions in securities, SFTR reporting
- Stock exchange
Private individuals are not legally required to have the LEI code.
What Is the Date to Submit an Application?
The last day for applications for entities that trade with the OTC market, corporate borrowers of large size, and other participants in markets that are not derivatives and have an asset worth more than ₹200 crores has already expired.
So, all the above participants must be required to apply the code of LEI to cover any upcoming transactions. The deadline for using the LEI code for those who deal in non-imitative markets with a net worth of fewer than ₹200 crores was March 31, 2020. This date is extendable until September 30, 2020, as per an RBI notice published on March 27, 2020.
Are There Consequences of Not Submitting?
Businesses that trade within OTC imitative markets won't be able to transact unless they have an official Legal Entity Identifier. Most importantly, those who borrow without an LEI code are not eligible for renewal or enhancement of credit facility.
Companies that deal in non-imitative market transactions are not permitted to conduct transactions on financial markets following the due date either as an investor, purchaser, issuer, retailer or a seller. The transactions conducted through the acknowledged stock exchanges are not within the scope of the LEI obligation.
What Does the LEI Cost?
The cost to register with an LEI number can differ. LEI lookup offers discounts if you select an option of multi-year. If you choose a 3-or 5-year subscription, LEI lookup will take charge of any subsequent annual renewals so that the user does not require action.
Every LEI company can set its rates for renewal and registration. GLEIF is charged a fee for each LEI issued, and this cost is typically included in the cost offered by various service providers. Agents can also provide other services, like the fast-track option, but for a higher cost.
What is the Fundamental Procedure for Registering to Apply for the LEI code?
To sign up for a Legal Entity Identifier to register, follow the steps as follows:
- The legal entity needs a new user to sign up via the official website of Legal Entity Identifier India Limited.
- A person with legal authorisation must complete the application upon establishing an account on the portal. Fill in the required information.
- After creating an account, you'll receive an e-mail confirmation to register your e-mail address. This is to enable and verify the account.
- A person with authorisation must click the link available in the e-mail to activate the account.
- Upon successful login, click on the LEI service tab. Also, a person with authorisation is the only one who can sign in and provide the necessary information.
- Once you have created your account on the site, an administrator must click on the "Information" and select the Legal Doc Download link.
- The required documents for each legal form are accessible and available for download.
- An authorised person must fill out an online form for registration and then send the original documents since there isn't an option to upload documents to the Legal Entity Identifier India Limited (LEIL) website.
If you feel the capital won't be sufficient for opening your business, you can look at the various government loan schemes.
What are the Necessary Documents You Must Submit for the Legal Entity Identifier (LEI) Codes?
You can look through the list of the essential documents that need to be submitted on the (www.ccilindia-lei.co.in) website (Go to, download - tab of Legal Doc Download.)
Following are the documents required:
- LEI certificate of registration or Incorporation
- PAN card
- Undertaking-cum-Indemnity according to the LEIL format
- Financial statements that are already audited
- Board resolutions by the format provided by LEIL. The general powers of attorney can be accepted when the legal entity agrees to submit a new board resolution using the form specified from LEIL when the board carries the next meeting a few days later.
- According to the LEIL's specified format, attorney authority is if the additional delegations by officials are named in board resolution.
It is important to note that there is no requirement to physically submit the essential documents if you upload all documents online. After that, you complete the payment online successfully.
Conclusion
This was the important information about how to apply for a Legal Entity Identifier. A Legal Entity Identifier code is valid for one year from the date of issuance. To renew after expiry, the entire record requires verification again to verify accuracy.
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