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Legal Entity Identifier (LEI) code

A Legal Entity Identifier (LEI) is a unique 20-character alphanumeric code assigned to legally registered entities that engage in financial transactions. Introduced as a global standard by the G20 and managed by the Global Legal Entity Identifier Foundation (GLEIF), the LEI system enhances transparency, accountability, and regulatory oversight in financial markets. In India, regulatory bodies such as the RBI and SEBI mandate the use of LEIs for companies, LLPs, trusts, and other entities involved in borrowing, securities trading, and derivatives. The LEI serves as a reliable tool for entity identification, enabling simplified compliance, better risk management, and improved financial system integrity.

WHAT IS LEGAL ENTITY IDENTIFIER (LEI)?

A Legal Entity Identifier (LEI) is a 20-character alphanumeric code used to uniquely identify legally registered entities participating in financial transactions. It was introduced by the G20 and is governed globally by the Global Legal Entity Identifier Foundation (GLEIF). In India, LEIs are issued by Legal Entity Identifier India Ltd. (LEIL), a subsidiary of the Clearing Corporation of India Ltd. (CCIL). LEIs are mandatory for various entities as per RBI, SEBI, and other financial regulators.

FEATURES OF LEI:

Unique Global Code: Each LEI is globally unique and cannot be duplicated.
Public Database: LEI data is accessible through a public database maintained by GLEIF.
Annual Renewal: Valid for 1 year and must be renewed to remain active.

REQUIREMENTS:

Legally Registered Entity: Must be a Company, LLP, Trust, Partnership, etc.
PAN Requirement: Must have a valid PAN.
Authorized Signatory: Must designate an authorized signatory for the application.
Ownership Disclosure: Must disclose ownership/parent entity details, if applicable.
KYC Documents: Must have all KYC and registration documents available.

ADVANTAGES OF LEGAL ENTITY IDENTIFIER (LEI):

Transparency: Enhances identification and transparency in financial transactions.
Global Recognition: Recognized by regulators and financial institutions worldwide.
Improved Risk Management: Helps regulators and banks assess credit and counterparty risks.
Supports KYC/AML: Useful for verification and due diligence in banking and trading.

ENTITIES REQUIRED TO OBTAIN LEI:

Companies and LLPs with fund/non-fund-based borrowing of ₹50 crore or more
Participants in government securities, money market, and derivative transactions
Mutual Funds, AIFs, and NBFCs
Large corporate borrowers and institutional investors
Trusts, Societies, and Partnerships engaged in financial activities

FREQUENTLY ASKED QUESTIONS

Q1: Who issues LEI in India?

A1: LEIL (Legal Entity Identifier India Ltd.), a CCIL subsidiary.

Q2: Is LEI mandatory for all companies?

A2: No, only for those involved in financial transactions as mandated by regulators.

Q3: What is the validity period of an LEI?

A3: 1 year. It must be renewed annually.

Q4: Can individuals apply for an LEI?

A4: No, only legal entities are eligible.

Q5: How long does it take to get an LEI?

A5: Usually 3–5 working days after successful application and verification.

Q6: What happens if an LEI is not renewed?

A6: The LEI becomes “Lapsed” and cannot be used for regulatory compliance.

Q7: Is LEI required for loan applications?

A7: Yes, for corporate entities with borrowings above ₹50 crore.

Q8: Is LEI applicable to NGOs or societies?

A8: Yes, if they engage in financial transactions regulated by authorities.

Q9: Can a foreign company apply for LEI in India?

A9: No, it must apply through an LOU in its home country.

Q10: Can a company have more than one LEI?

A10: No, each legal entity is assigned only one LEI.

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Frequently Asked Questions

Chartered Accountants (CAs), Tax Return Preparers, Tax Consultants and Certified Tax Professionals are the experts in India who can guide and file returns.

Private Limited Company set-up process typically takes around 10-12 working days. However, it can vary depending on several factors, such as the speed of document submission, verification, and approval from the authorities.

Selection of suitable entity structure for a startup involves considering several factors such as:

1. Business Goals: Define your startup's mission, vision, and objectives.
2. Ownership: Determine the number of owners (sole proprietorship, partnership, or multiple owners).
3. Liability: Consider the level of personal liability protection needed.
4. Taxation: Think about tax implications.
5. Funding: Will you need to raise capital from investors or lenders?
6. Growth Plans: Consider future expansion, mergers, or acquisitions.
7. Compliance: Evaluate the regulatory requirements and compliance burden.
8. Flexibility: Assess the need for flexibility in decision-making and management.

Common business structures for startups:
1. Sole Proprietorship: Simple, low-cost, but offers no liability protection.
2. Partnership: Shared ownership, but partners have personal liability.
3. Limited Liability Partnership (LLP): Combines partnership benefits with liability protection.
4. Private Limited Company: Offers liability protection, tax benefits, and credibility.
5. Limited Liability Company (LLC): Flexible with liability protection.

The Presumptive Taxation Scheme (PTS) offers several benefits to small businesses and professionals:

1. Simplified Accounting: No need to maintain detailed accounts and records.
2. Estimated Income: Tax is calculated on an estimated income, rather than actual profits.
3. Reduced Compliance: No requirement to get accounts audited.
4. Lower Tax Liability: Tax is calculated at a prescribed rate.
5. Exemption from Tax Audit: No requirement to get tax audit done.
6. Easy Calculation: Profit is calculated on a fixed percentage of gross receipts.

No, you cannot obtain two Director Identification Numbers (DIN) for two companies. DIN is a unique identifier assigned to an individual who is a director or proposed to be a director of a company. If you want to be a director in two companies then you can use the same DIN for both companies.

Yes, it is mandatory to maintain records of all financial transactions for your business. The Companies Act, 2013 and the Income Tax Act, 1961, require businesses to maintain accurate and complete financial records and it should be accurate; up-to-date; easily accessible for inspection by authorities and must be retained for a minimum of 8 years.

Maintaining financial records helps:
1. Track business performance: Accurate records can help you track your business performance, identify opportunities and problems and compare your business to others.
2. Prepare financial statements: Accurate records are needed to prepare financial statements, such as income statements and balance sheets. These statements can help you manage your business and deal with creditors and banks.
3. File tax returns: Accurate records can help you comply with tax laws and avoid penalties.
4. Detect and prevent fraud: Accurate records can help prevent and detect fraud and theft.

Failure to maintain proper financial records can result in penalties, fines, and legal issues.

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