Global Capability Centres in India: The Definitive Legal and Strategic Playbook

Why India, Why Now, and Why It Is More Complicated Than You Think

Let us acknowledge the obvious: India offers compelling economics for capability centres. Labour cost arbitrage remains significant. A senior engineer in Bengaluru costs 20 to 30 percent of their Bay Area counterpart. The talent pool is genuinely deep, with India producing over 1.5 million engineering graduates annually. English proficiency eliminates translation overhead. Time zone positioning enables genuine follow the sun operations.

But the companies that succeed in India are not here just for cost savings. The GCCs that thrive are those that came for arbitrage and stayed for capability. Over two decades, we have watched GCCs evolve from back office processing centres into genuine innovation hubs. The GCC that builds your finance shared services today may be developing your AI strategy tomorrow.

Here is what makes India different from your typical offshore location: the regulatory environment is sophisticated but labyrinthine. You are not dealing with a developing market eager to waive rules for foreign investment. You are dealing with a mature legal system that takes corporate governance, tax compliance, labour rights, and data protection seriously. The companies that treat India as a jurisdiction requiring genuine legal attention, rather than a cost centre to be set up quickly, are the ones that avoid the nasty surprises.

We have seen multinationals lose years of accumulated goodwill over transfer pricing disputes they thought were settled. We have seen employment terminations that seemed routine under parent company standards become protracted litigation in Indian labour courts. We have seen intellectual property developed in Indian GCCs end up in murky ownership situations because nobody drafted proper IP assignment agreements.

This white paper exists because we believe most of these problems are preventable. The legal framework in India is complex, but it is not unpredictable. With proper structuring, diligent compliance, and experienced local counsel, GCCs can operate successfully for decades. The investment in getting the foundation right pays dividends forever.

Entity Selection: The Decision That Shapes Everything

The first question every GCC faces is deceptively simple: what legal entity should we establish? The answer shapes your tax position, your liability exposure, your compliance burden, and your exit flexibility for years to come. We have seen companies treat this as a finance decision, whatever minimizes the tax rate. That is a mistake. Entity selection is fundamentally a business strategy decision with legal and tax implications.

The wholly owned subsidiary remains the default choice for most GCCs, and for good reason. A WOS under the Companies Act, 2013 provides complete operational control, limited liability for the parent, and a familiar corporate governance structure. But the WOS route requires more capital commitment and brings comprehensive regulatory obligations under Indian company law.

For the WOS structure, you are looking at minimum authorized capital of ₹1 lakh (roughly $1,200), though practical capital requirements depend on your operational scale. More significantly, you will need at least two directors, with at least one being an Indian resident who has stayed in India for at least 182 days in the previous calendar year. Finding the right resident director is often harder than it sounds. You need someone trustworthy enough to hold director liability but available enough to fulfil the role meaningfully.

The Limited Liability Partnership structure appeals to some GCCs because of its tax treatment. LLPs are not subject to dividend distribution tax, and profit distributions to partners are not taxed at the entity level. But LLPs come with restrictions that make them impractical for most GCCs. An LLP cannot issue equity linked instruments, which constrains employee compensation structures. And recent changes require LLPs with turnover above ₹40 crore to maintain accounts on accrual basis and get them audited, eroding the compliance simplicity that was the LLP's main advantage.

Branch offices are technically possible but rarely advisable. A branch creates permanent establishment concerns for the parent, and the branch's activities are restricted to liaison, representation, and specific approved activities. For a genuine capability centre, the branch structure creates more problems than it solves.

Our standard recommendation for most GCCs: start with a wholly owned subsidiary. The additional compliance burden is manageable with proper systems, and the structure provides maximum flexibility for future evolution, whether that is expanding operations, bringing in local investors, or eventual divestiture.

FEMA and RBI: The Foreign Exchange Framework Nobody Explains Clearly

Every rupee that flows into your GCC, and every rupee that flows out, is governed by the Foreign Exchange Management Act, 1999 and the Reserve Bank of India's regulations thereunder. This framework is comprehensive, technical, and absolutely unforgiving of procedural failures. We have seen transactions delayed by months over documentation issues that proper planning would have prevented.

Let us start with equity investment. When a foreign parent establishes an Indian subsidiary, the capital infusion happens under the Automatic Route or Government Route, depending on your sector. Most IT services and shared services operations qualify for the Automatic Route, meaning no prior government approval. But this does not mean no compliance. You must ensure pricing complies with RBI guidelines (fair market value for unlisted companies, SEBI pricing for listed), file required forms with the authorized dealer bank within stipulated timelines, and obtain necessary documentation.

The most common mistake we see: treating the timeline casually. When you receive foreign investment, you must report it to RBI through the Single Master Form within 30 days of receipt. Miss this deadline, and you are compounding a regularisation application that takes months. The investment itself is not affected, but your compliance record is, and that matters when you are seeking future approvals.

Intercompany transactions are where most GCCs create problems for themselves. Every payment from your Indian entity to the parent, whether for services received, technology licensed, or management fees, requires proper documentation, arm's length pricing, and appropriate withholding. The interplay between FEMA provisions and transfer pricing requirements is technical, but getting it wrong creates exposure on multiple fronts.

Repatriation of profits requires board resolutions, statutory auditor certifications, and compliance with Companies Act dividend distribution rules. You cannot simply wire money to the parent because your bank account has a surplus. Every outward remittance must be justified, documented, and processed through authorized channels.

One area that catches sophisticated companies: External Commercial Borrowings regulations. If your GCC borrows from the parent company, even for legitimate working capital purposes, you must comply with RBI's ECB framework, including all in cost ceilings, end use restrictions, and reporting requirements. Many GCCs have informal intercompany loans that technically violate ECB regulations, creating issues that surface during due diligence or audits.

Transfer Pricing: The Issue That Will Define Your India Tax Experience

We will be direct: transfer pricing is the single most litigated area of Indian corporate taxation. The amounts at stake are significant, the disputes are protracted, and the Indian tax authorities are increasingly sophisticated. If you are establishing a GCC, transfer pricing deserves more attention than any other tax issue.

The core principle is simple: transactions between your Indian GCC and foreign affiliated entities must be priced as if the parties were independent. The application is anything but simple. What is the arm's length price for proprietary software development services? How do you value shared services that have no market equivalent? What markup is appropriate for captive R&D operations?

Indian transfer pricing regulations recognize five methods for determining arm's length price: Comparable Uncontrolled Price, Resale Price Method, Cost Plus Method, Transactional Net Margin Method, and Profit Split Method. For most GCCs, TNMM becomes the operative method. You are benchmarking your net operating margin against comparable third party service providers.

Here is where it gets contentious. GCCs typically operate as cost centres, earning a markup on their operating costs. The markup percentage becomes a battleground. Indian tax authorities routinely argue that GCCs underreport their value contribution, that the comparable companies selected are inappropriate, or that the markup should be higher because the GCC performs high value functions.

We have defended these positions in dozens of cases. Our advice: document aggressively from day one. Maintain contemporaneous documentation of your functional analysis. What activities does your GCC actually perform, what assets does it use, what risks does it bear? The companies that treat transfer pricing documentation as an annual compliance exercise, prepared after year end, consistently face more aggressive challenges than those that document in real time.

The safe harbour provisions introduced by CBDT provide an alternative for certain GCCs. If you meet the conditions and accept the prescribed markup ranges, you can avoid transfer pricing scrutiny on those transactions. But the safe harbours are narrow and the prescribed markups may exceed what arm's length analysis would support. Calculate carefully before opting in.

Consider an Advance Pricing Agreement for significant intercompany transactions. An APA is a binding agreement with the tax department on transfer pricing methodology for future years. The process is demanding, typically 2 to 3 years of negotiation, but the certainty is valuable. Bilateral APAs that include the parent company's jurisdiction are even more protective but require coordination with multiple tax authorities.

Labour Law: The Compliance Area That Keeps Getting More Complex

Indian labour law is not for the faint hearted. The framework comprises central legislation, state specific rules, and a body of case law that defies easy summary. The four new Labour Codes on Wages, Industrial Relations, Social Security, and Occupational Safety were enacted in 2019 and 2020 but remain only partially implemented. Most states still operate under the legacy laws. This creates a compliance environment that is, frankly, a mess.

For GCCs, the critical issues are employment contracts, termination procedures, working time regulations, and social security contributions. Let us take each in turn.

Employment contracts in India cannot simply replicate your parent company templates. Indian law implies certain terms that cannot be contracted away. Notice periods have statutory minimums, wage components must comply with the Code on Wages definitions, and certain employee categories have additional protections. Your employment agreements need to be India specific, drafted with local law in mind.

Termination is where we see the most painful surprises. At will employment does not exist in India the way American companies understand it. Employees who qualify as workmen under industrial law have significant protection against termination. In establishments with 100 or more workers, retrenchment requires government permission that is rarely granted. Even for managerial employees, termination must follow proper procedure and be supported by documented grounds. The costs of getting this wrong include reinstatement orders, back wages, and reputational damage in a market where talent talks.

Working time regulations are technically strict but practically flexible in the IT sector. The Shops and Establishments Acts of various states govern working hours, rest intervals, overtime, and leave. IT and ITES companies generally have exemptions from certain provisions, but these exemptions are not blanket permissions. They have conditions that must be observed. We have seen companies assume IT exemption meant no compliance, only to face penalties during inspections.

Social security contributions are substantial and non negotiable. Provident Fund contributions (typically 12 percent employer, 12 percent employee) apply to employees earning below threshold limits. Employee State Insurance applies to employees earning below ₹21,000 per month. Gratuity obligations accrue after five years of service. Professional Tax varies by state. Each of these has registration requirements, contribution deadlines, and penalty provisions for default.

The gig economy and contractor arrangements deserve special mention. Many GCCs use staffing agencies for flexibility. This is legally permissible, but the principal employer liability provisions mean you cannot fully insulate yourself from the agency's compliance failures. If your staffing partner does not deposit PF contributions, your GCC may face recovery proceedings. Due diligence on staffing partners, and contractual indemnities backed by genuine capability, is essential.

Data Protection and Cross Border Transfers: The DPDPA Dimension

Every GCC processes personal data: employee information, customer data, operational data that touches individuals. The Digital Personal Data Protection Act, 2023 applies to all of it. If you have read our DPDPA compliance roadmap, you know the framework. Here, we focus on the specific implications for GCCs.

GCCs typically act as data processors for their parent companies. The parent, as data fiduciary, retains primary compliance responsibility. But the DPDPA imposes direct obligations on processors too. Your GCC must process data only in accordance with the fiduciary's instructions, implement appropriate security safeguards, and assist the fiduciary in responding to data principal rights requests.

Cross border data transfers are central to GCC operations. The entire value proposition involves moving data, code, analytics, financial records, between India and other jurisdictions. Under DPDPA's current framework, transfers are permitted except to countries the government specifically restricts. But this permissive approach may tighten. GCCs should monitor regulatory developments and build data localization capability into their architecture.

The interplay between DPDPA and sectoral regulations creates additional complexity. If your GCC handles financial services data, RBI's data localisation requirements apply. Payment system data must be stored in India. Healthcare data brings its own sensitivities. Client data subject to attorney client privilege or data covered by foreign secrecy laws raises additional considerations.

Employee data deserves specific attention. Your GCC's HR function processes significant personal data: recruitment information, performance records, compensation details, health information. The DPDPA's consent requirements apply differently in employment contexts (consent is deemed for certain purposes), but employee privacy rights are real and growing. Build privacy considerations into your HR processes from the beginning.

Practically speaking, every GCC needs a data protection programme that addresses: inventory of personal data processed, legal basis for each processing activity, cross border transfer mechanisms, security measures appropriate to data sensitivity, breach response procedures, and data principal rights fulfilment processes. The investment in building this programme is modest compared to the cost of a data breach. Regulatory penalty, litigation exposure, and reputational damage.

Intellectual Property: Getting Ownership Right

Intellectual property developed in your Indian GCC belongs to whom? The answer seems obvious, the company that employs the developers. But Indian IP law has nuances that can create unexpected outcomes, and we have seen disputes that sophisticated companies should have prevented.

Under the Indian Patents Act, 1970, inventions created by employees in the course of their employment belong to the employer. But in the course of employment has limits. If an employee develops something using employer resources but outside their job responsibilities, ownership can be contested. And for contractors or consultants, the default is that the creator owns the IP unless assignment is explicitly contracted.

The practical lesson: robust IP assignment agreements are non negotiable. Every employee's terms of employment should include clear provisions assigning all work product IP to the employer. Every contractor engagement should have IP assignment clauses. These agreements should be signed before work begins, not after creation when bargaining positions have shifted.

For patents specifically, there is an additional wrinkle. If an invention is created in India by an Indian resident, the Patents Act requires that any patent application first be filed in India, or that permission be obtained from the Controller of Patents before foreign filing. Violating this first filing requirement can invalidate the patent. GCCs that are centres of innovation need processes to identify patentable inventions and route them through proper filing procedures.

Software copyright, the IP category most relevant for IT GCCs, is more straightforward. The Copyright Act, 1957 assigns copyright in works created during employment to the employer. But even here, ensure your employment agreements are explicit. Indian courts have held that employment relationship alone is not sufficient if the work falls outside the employee's designated duties.

Trade secrets and confidential information require contractual protection. India does not have comprehensive trade secret legislation. Protection comes from contract law and equitable principles. Your employment agreements need confidentiality provisions, and those provisions need to be reasonable in scope. Overbroad restrictions may be struck down, leaving you with less protection than you thought you had.

One often overlooked issue: open source software compliance. GCC developers routinely incorporate open source components into their work. Some open source licenses (particularly copyleft licenses like GPL) can create obligations that attach to derivative works. Your GCC needs open source governance. A policy framework that guides developers on permitted licenses and ensures compliance with attribution and disclosure requirements.

Location Strategy: Where in India and Why It Matters

India offers multiple credible GCC locations, each with distinct advantages. The choice involves tradeoffs between talent availability, cost, infrastructure, and regulatory incentives. Here is what the location consultants sometimes gloss over.

Bengaluru remains the undisputed GCC capital. Over 500 GCCs, the deepest tech talent pool, the most mature ecosystem. But Bengaluru's advantages come with disadvantages: intense competition for talent, high attrition rates (20 to 25 percent in some segments), and infrastructure that has not kept pace with growth. If you are establishing a large scale engineering centre, Bengaluru is probably still your first choice. If you are building shared services or support operations, other cities may serve you better.

Hyderabad has emerged as the clear second choice, with strong technology infrastructure, state government support, and a talent pool that is deep in both IT and domain expertise (particularly pharmaceuticals and financial services). Costs are 15 to 20 percent lower than Bengaluru, and attrition is somewhat better. The Telugu states' proactive investment policies mean you may find incentive packages worth considering.

Pune attracts GCCs that value proximity to Mumbai (financial and corporate headquarters) while seeking more manageable costs. The city has strong engineering colleges and an established IT ecosystem. Automotive and manufacturing GCCs particularly favor Pune because of domain expertise from the industrial base.

Chennai offers cost advantages, strong talent in engineering and finance functions, and lower attrition than Bengaluru or Hyderabad. The Tamil Nadu government has been increasingly active in attracting GCCs. But Chennai's tech ecosystem is less deep than the top tier cities, and specific skill sets may be harder to find.

The National Capital Region (Delhi, Gurgaon, Noida) serves GCCs that need proximity to government, established multinationals, and North India markets. Costs are comparable to Bengaluru for talent, but real estate can be more affordable. The NCR's geographic spread means GCCs here often need to account for traffic related challenges in their operations planning.

Ahmedabad and Gujarat are emerging plays. Gujarat's pro business government, GIFT City's IFSC incentives, and lower costs attract GCCs in financial services and shared services. The talent pool is growing but not yet mature for specialized technical roles.

Our advice on location: do not chase incentives at the expense of fundamentals. State governments will offer tax holidays, capital subsidies, and various sweeteners. These matter, but not as much as talent availability, quality of life that helps retention, and infrastructure reliability. The wrong location choice creates problems that no incentive can offset.

SEZ Versus Non SEZ: The Incentive Calculation

Special Economic Zones offer significant tax benefits for GCCs: 100 percent income tax exemption on export profits for the first five years, 50 percent exemption for the next five years, and certain GST advantages. On paper, the math is compelling. In practice, the calculation is more complex.

SEZ benefits come with restrictions. Your operations must be physically located within the SEZ. Domestic sales (services to Indian clients) are limited. There are minimum investment and employment commitments. You need approval from the SEZ authority and ongoing compliance monitoring. The administrative overhead is real.

More significantly, the tax exemptions are being phased out. New SEZ units no longer get the full tax holiday they would have received five years ago. The sunset provisions mean the incentive window is closing. For a new GCC in 2026, the residual SEZ tax benefits may not justify the location constraints.

The alternative is setting up outside SEZ zones (what is called the Domestic Tariff Area) with location based incentives from state governments. Several states offer IT policy incentives including capital subsidies, SGST reimbursement, stamp duty exemptions, and power tariff concessions. These incentives do not match SEZ tax benefits in absolute value, but they come with fewer restrictions.

Our framework for SEZ evaluation: if your GCC will be primarily export oriented (limited Indian client work), has significant projected profits in the medium term, and can commit to SEZ location constraints, the remaining SEZ benefits may be worth capturing. If your GCC model includes meaningful India market activities, or if profitability is uncertain in early years, DTA setup with state incentives may be more practical.

Whatever you choose, document the analysis. Your reasoning for entity location and incentive claims should be memorialized contemporaneously. When tax authorities ask questions years later, and they will, you want to demonstrate that decisions were made thoughtfully, not opportunistically.

Intercompany Agreements: The Documents That Make or Break Your Structure

The contractual architecture between your Indian GCC and parent company deserves as much attention as any other aspect of setup. These agreements define the relationship for tax purposes, allocate intellectual property, establish service levels, and create the documentation that regulators will scrutinize. Draft them properly at the outset. Reconstructing them later is expensive and invites questions about the structure's authenticity.

The Services Agreement is foundational. What services does your GCC provide to the parent? How are they priced? What are the performance standards? The temptation is to draft a brief, general agreement that covers IT services without specification. Resist this temptation. Transfer pricing authorities want to see that your intercompany prices reflect the actual activities performed, risks borne, and assets employed. A vague agreement leaves room for characterization disputes.

Technology License Agreements matter if your GCC uses parent company technology: software platforms, proprietary tools, know how. The license terms should specify the technology covered, the usage rights granted, and the royalty structure. If your GCC pays royalties to the parent, those payments face withholding tax (typically 10 to 15 percent under tax treaties), and the royalty rates must be arm's length.

Cost Allocation Agreements for shared corporate services, legal, HR, finance functions performed by the parent for the GCC's benefit, need documented methodology. What costs are included? How are they allocated? The documentation should be sufficient that an auditor could replicate your calculations.

Management Services Agreements address strategic oversight, governance support, and management bandwidth provided by the parent. These agreements are often challenged by tax authorities as disguised profit extraction. Document the services actually rendered, ensure the fees are commensurate with value delivered, and maintain evidence of services received (meeting records, advisory memoranda, and similar documentation).

IP Assignment Agreements, discussed earlier, should cover all categories of intellectual property your GCC might create: inventions, software, trademarks, know how. Make the assignment present and comprehensive, not dependent on future actions.

Data Processing Agreements required under DPDPA formalise the data controller processor relationship between parent and GCC. These agreements should address processing purposes, security obligations, breach notification, and sub processor engagement.

Each of these agreements should be negotiated and executed before operations commence. The we will sort out the paperwork later approach creates risk that materialises years down the line when you are least prepared to address it.

Operational Compliance: Building Systems That Work

Establishing your GCC is a project. Operating it compliantly is a permanent condition. The compliance obligations span company law, tax, labour, foreign exchange, data protection, and sector specific regulations. You need systems, not just awareness.

Company law compliance includes annual filings (financial statements, annual returns), board meeting requirements (minimum four per year), director responsibilities, and statutory audit. For subsidiaries of foreign companies, additional reporting applies. Miss filing deadlines, and penalties accumulate quickly. Your company secretary or compliance function needs calendars, reminders, and escalation procedures.

Tax compliance extends beyond annual returns. Advance tax installments are due quarterly. TDS (Tax Deducted at Source) on salary, vendor payments, and intercompany transactions has monthly deposit and quarterly filing deadlines. GST has monthly return filing for most taxpayers. Transfer pricing documentation must be maintained contemporaneously. The compliance burden is substantial, and outsourcing to competent professionals is usually more cost effective than building in house capability.

Labour compliance varies by state but typically includes: PF and ESI contributions (monthly), Professional Tax (monthly or annual), maintenance of prescribed registers, annual returns under various labour laws, and periodic license renewals. Many states now have online compliance portals that simplify procedural aspects, but someone must monitor requirements and execute timely.

FEMA compliance includes annual return filing for foreign owned entities, event based reporting for equity transactions, and compliance certificates for certain remittances. The reporting deadlines are strict and delays create compounding problems.

Build your compliance calendar before you begin operations. Assign clear ownership for each compliance area. Implement review mechanisms to catch failures before they become violations. The best GCC compliance functions operate proactively, anticipating requirements, not reacting to missed deadlines.

Scaling Up: From Pilot to Full Operations

Most GCCs start small and grow. The pilot might be 50 people; the aspiration is 500 or 5,000. Scaling involves challenges that are not apparent at pilot scale, and the legal framework creates specific considerations as you grow.

Headcount thresholds trigger regulatory requirements. At 100 employees, provisions of the Industrial Employment (Standing Orders) Act typically apply, requiring certified standing orders governing workplace conduct. At certain thresholds, establishments become subject to industrial dispute provisions that constrain termination flexibility. As you approach these thresholds, ensure your HR policies and practices are designed to operate within the more demanding regulatory framework.

Real estate expansion, whether leasing additional space or moving to larger premises, involves its own legal considerations. Commercial lease agreements in India are heavily negotiated, with terms on lock in periods, rent escalation, fit out contributions, and termination rights that vary significantly. RERA (Real Estate Regulatory Authority) provisions apply to certain commercial projects. Stamp duty on leases is substantial in some states.

Entity restructuring may become necessary as you scale. Perhaps you establish multiple entities for different functions (IT services, R&D, shared services) for transfer pricing optimisation. Perhaps you bring in local investors for specific business lines. Perhaps you establish entities in different locations. Each restructuring creates FEMA, tax, and corporate law implications that need careful navigation.

M&A considerations merit mention. GCCs sometimes acquire Indian companies, either competitors, capability additions, or acqui hires. Indian M&A involves extensive due diligence, regulatory approvals (Competition Commission of India for larger transactions, FIPB or RBI for certain sectors), complex transaction structures, and post closing integration. If acquisition is part of your growth strategy, build M&A capability early, either in house or through trusted advisors.

We have seen GCCs that grew organically without legal oversight discover, at significant scale, that their structures had accumulated problems: unexecuted agreements, expired licenses, unreported transactions, compliance gaps. The cost of remediation at scale is multiples of what prevention would have cost. Build legal and compliance functions that grow with your operations.

Risk Management and Governance: What Boards Should Ask

If you are on the board of a company with an Indian GCC, or if you are the GCC's local director, you need to understand what you are accountable for. Indian law imposes personal liability on directors for a range of corporate failures. Ignorance is not a defense.

The Companies Act, 2013 requires directors to act in good faith and in the best interests of the company. But it goes further. Directors can be held personally liable for defaults in filing returns, failures in maintaining accounts, non compliance with statutory requirements, and in extreme cases, criminal liability for fraud or misrepresentation. The nominee director position, where a parent company nominates someone to an Indian subsidiary board, does not exempt you from these obligations.

Tax authorities can pursue directors personally for certain tax defaults, including TDS non deposits and fraud. Labour authorities can hold directors liable for wage and contribution defaults. Environmental violations can create personal criminal liability. As India's enforcement mechanisms mature, the personal risk to directors increases.

What should boards be asking? First, is our compliance calendar being followed? Require regular reporting on compliance status, not just year end confirmation. Second, are our intercompany arrangements documented and arm's length? Transfer pricing exposure is one of the largest risks for GCC entities. Third, do we have adequate D&O insurance covering Indian operations? Parent company policies may not automatically extend to Indian subsidiary directors. Fourth, are there any ongoing disputes, investigations, or litigation? Early visibility enables better management.

Regular governance audits, not just financial audits, help identify issues before they become crises. Engage experienced corporate governance professionals to review your structures, processes, and documentation periodically. The investment is modest; the value is significant.

Exit Planning: Because Nothing Lasts Forever

No one establishes a GCC planning to close it. But circumstances change: business strategies evolve, economic conditions shift, companies get acquired. When exit becomes necessary, the legal framework creates both constraints and options.

The cleanest exit is a sale to a third party. If your GCC has developed genuine capability, there may be buyers: other multinationals seeking established operations, private equity funds investing in India IT services, or strategic buyers seeking specific capabilities. Sale involves valuation (which transfer pricing documentation supports), due diligence (which clean records facilitate), and transaction structuring (which involves FEMA, tax, and corporate law considerations).

Winding up an Indian company is procedurally complex and time consuming. Voluntary liquidation under the Insolvency and Bankruptcy Code requires shareholder and creditor approval, appointment of a liquidator, realisation of assets, and settlement of liabilities. The process takes 1 to 2 years minimum, often longer. Throughout this period, compliance obligations continue, and the entity cannot simply be abandoned.

The labour law implications of closure deserve special attention. Retrenchment of employees requires following prescribed procedures, payment of statutory compensation, and in larger establishments, government approval. The costs can be substantial: gratuity, leave encashment, notice pay, retrenchment compensation. These costs should be factored into exit planning.

Tax clearances are required before final distributions. Capital gains on asset sales, distribution of accumulated profits, and various other tax obligations must be settled. If there are open tax assessments or disputes, closure becomes even more complex.

We advise GCCs to build exit optionality into their structures from the beginning. Keep entities clean. Separate functions that might have different exit paths. Maintain documentation that supports valuation. Ensure employment contracts address exit scenarios. Preserve relationships with potential acquirers, even if exit seems distant. The companies that exit smoothly are those that planned for the possibility.

The Bottom Line: What We Tell Every GCC Client

After two decades of advising GCCs across sectors and sizes, we have distilled our guidance to a few essential principles.

First, invest in the foundation. The legal structuring decisions you make at establishment, entity selection, intercompany agreements, compliance frameworks, will shape your India experience for years. The cost of getting it right at the outset is a fraction of the cost of fixing problems later. Do not let urgency to launch override thoroughness.

Second, respect the complexity. India's regulatory environment is sophisticated. It demands genuine attention, not dismissive compliance. The tax authorities are capable. The labour courts are active. The enforcement mechanisms are maturing. Treat India as a major jurisdiction requiring serious legal attention, and you will navigate it successfully.

Third, document everything. Transfer pricing disputes, employment claims, regulatory inquiries: they all come down to what you can prove happened. Contemporaneous documentation is your best protection. Build documentation disciplines into your operations from day one.

Fourth, build relationships. India's legal framework has formal rules, but it also has informal dimensions. Relationships with regulators, reputation in the talent market, standing in the business community: these matter. Invest in being a responsible corporate citizen. It pays dividends in ways that are not immediately obvious.

Fifth, plan for evolution. Your GCC will change. What starts as a support function may become a strategic capability. What begins as a small team may grow to thousands. Build flexibility into your structures. Anticipate the regulatory implications of growth. Evolve your governance as your operations mature.

India offers genuine opportunity for Global Capability Centres. The talent is real. The cost advantages persist. The ecosystem is mature. But realising that opportunity requires navigating legal complexity with skill and attention. We hope this guide helps you do exactly that.