In the current era of corporates, credit to the advancement in technology, transactions between businesses take place at excessive levels & involve significantly massive amounts. As a result, financial institutions and businesses are exposed to substantial risk. The global financial crisis of 2007-08 gave rise to transparency in financial transactions. The point is that an important number of corporations engaged in window dressing & the further concealment of debt that the company or entity had previously held to raise more funds & attract investors indeed resulted in catastrophe. These events eventually led to the requirement for establishing a system like the Legal Entity Identifier system. In this write-up, we will focus on the Legal Entity Identifier Renewal.
What is the Legal Entity Identifier (LEI) Code?
The LEI Code is formatted as a 20-character, alpha-number code based on the ISO 17442 standard developed through the ISO (International Organisation for Standardization). It connects to key reference details about a party, enabling unique and clear identification of legal entities participating in financial transactions. All LEI contains information on an entity’s ownership structure and thus answers the questions of ‘who is who & ‘who owns whom’, thereby bringing greater clarity to worldwide transactions. This publicly available Legal Entity Identifier data pool can be considered a global directory of participants in the financial market.
Legal Entity Identifier Renewal: Mandatory LEI Direction by the RBI
In the year 2017, the Reserve Bank of India (RBI), utilising its powers under Section 35 of the Banking Regulation Act, advised banks to mandatorily ask their large borrowers having fund exposures upwards of Rs.5 crores-Rs.50 crores to get an LEI. It is also said that banks should encourage large borrowers to obtain LEI for their parent entity, subsidiaries & associates. Thus, Legal Entity Identifier has been implemented in a phased manner for participants in the over-the-counter markets for rupees interest rate derivatives, foreign currency derivatives & credit derivatives in India. In a notification released in 2018, the central bank of the Country, the RBI, has made it mandatory for each market participant, other than individuals, to get an LEI. Thus, any legal entity like a corporate form of partnership, business, or association of persons dealing in financial transactions would have to get an LEI number.
Legal Entity Identifier Renewal: Applicability for LEI code
The following are entities eligible to apply for Legal Entity Identifier Code are:
- Sole Proprietorships
- Limited Liability Partnerships
- Partnership Firms
- Public Limited Companies
- Private Limited Companies
- Government Companies
- Insurance Companies
- One person Company
- Housing Finance Companies
- Non-profit companies
- Non-Banking Finance Companies
- Mutual Funds-sub Scheme
- Special Purpose Vehicles-trust, SPV-Partnership Firms, Special Purpose Vehicles-Companies, Co-operative Societies or Multistate Co-operative Societies Mutual Fund.
- Pension Fund
- Pension Fund Sub-Scheme
- Alternative Investment Fund (AIF), AIF-Sub Scheme, Scheduled Urban Cooperative Bank, Nationalised Banks, RRBs, Banking Companies-Others, Payment Banks, Stand Alone Primary Dealers, Unlimited Companies, Public Financial Institutions, Cooperative Societies or Multistate Cooperative Societies, Government Organizations, Companies Limited through Guarantee, Superannuation/Provident/Insurance/Gratuity Fund etc.
Legal Entity Identifier Renewal: How to Obtain an LEI?
The Legal Entity Identifier Code be obtained by following the steps mentioned below:
Step 1: Document List: Log in on the online portal and access the “downloads” tab. The checklist for the documents & their specific formats essential for submission is available here based on the entity’s legal structure.
Step 2: Self-registration on the online portal: A person needs to be appointed as the authorised person to look over & carry out the procedure of obtaining the LEI Code. A person may be appointed as an authorised person through a power of attorney, resolution or voluntarily, as the case may be. Only this authorised user has permission to create an account, providing his official email id & proceeding to fill up the online form. Authorised persons include:
- Name & email id of the authorised officials named in the online form.
- A primary user who submits the online application form (authorised User).
- Secondary User- name & email id of the secondary authorised officials named in the form.
Step 3: The LEI registration form consists of 5 pages, including the payment gateway.
- Company Details Page: All the company’s basic information is entered on this particular page.
- Ultimate Parent Page: Where the companies are step-down subsidiaries and the parent’s information, the ultimate parent’s information is also to be provided.
- Holding Company Page: Information about the parent company will be filed here.
- Payment Page: The payment for the form is to be made once it is complete.
- Upload Page: The essential documents are uploaded on this page. After the form is filled, the payment page offers the option to either make the payment online or select the option of a demand draft. In case any of the online payment options are chosen, following which the “Submit & Save” option is selected, after the payment is received through the LEIL (Legal Entity Identifier India Limited, a reference number, an email is also sent, informing the list documents to be submitted to the LEIL. In case the demand draft option is selected, the reference number & email are generated immediately.
Step 4: Submission of the Documents: The applicant entity will have to upload the vital documents given in the email. If the upload is unsuccessful, the documents may be couriered to the following address: LEIL (the clearing corporation of India ltd.) CCIL Bhavan, S.k. Bole Road, Dadar west Mumbai-400028.
Step 5: Verification Procedure: After the documents are uploaded, they will be verified through the LEIL and the application form. If essential, the LEIL may ask for additional documents as well. The application form is online through the LEIL.
Step 6: Issue of LEI Code: The LEI code will be issued on the successful submission & verification of the form & the related documents. The Legal Entity Identifier code will be sent in an email to the entity, and this code needs to be provided to the banks.
Process of Legal Entity Identifier Renewal
The typical duration of an LEI Code is one year. The code needs to be renewed through an application form to keep using it. The difference is that you should choose “Modify and Renewal” rather than “Register” on the same internet page where you usually find this information. Again, the authorised individual is required to make any modifications to this section. When the LEI Code is typed into the form, all the information is immediately filled in. Any necessary changes must be made. The “Legal Entity Identifier Renewal” checkbox must be correctly selected before continuing with the standard form filling, payment, and document submission procedure. All those mentioned above must be submitted successfully for the LEI Code to be renewed.
The LEI is issued through the Global Legal Entity Identifier Foundation, a not-for-profit organisation established under the Financial Stability Board in 2014. It includes a regulatory oversight committee represented by public authorities in many countries and publishes the Global LEI Index.
Read our Article:Benefits of LEI Number – An Overview