Two decisions sit at the front of any GCC project, and they shape everything after: how the centre is run, and what it is legally. The model, your own captive, a build-operate-transfer arrangement, or managed services, sets control, speed and how intellectual property is owned. The entity, almost always a wholly-owned company, sets how you employ people, hold that IP and govern the centre. Both are far cheaper to get right at the start than to unwind once a few hundred people and a body of IP sit inside the structure.
At a glance
- three models: own captive, build-operate-transfer (BOT), and managed services or outsourcing;
- a captive gives the most control and the cleanest IP ownership; outsourcing gives the least;
- BOT trades some control for a faster, partner-run start with a later transfer to you;
- the usual entity is a wholly-owned private limited company under the Companies Act;
- however you start, IP must be owned and assigned cleanly, because it interacts with transfer pricing.
The model: captive, BOT or managed
The first choice is who runs the centre and who owns it over time.
The trade-off runs along one axis: control and ownership against speed and risk. A captive gives the most control over people, culture and IP, at the cost of having to build everything yourself; outsourcing gives the least control but the fastest start and no entity to run; BOT sits between, letting a partner stand the centre up before you take it over. The deciding question is whether the work is core and durable. If it is, and you want to own the people and the IP, the captive is usually the destination even when BOT is the on-ramp; if it is peripheral or short-horizon, a managed arrangement is the honest answer.
Build-operate-transfer in practice
BOT has become a common way into India because it removes the early execution risk. A specialist partner secures space, recruits the initial team and runs operations against agreed service levels, and after a defined period you exercise an option to acquire the entity and the team. It lets a foreign company start months earlier than a from-scratch build and learn the market before committing fully.
The detail that decides whether BOT works is the transfer itself. The contract has to fix how and when the option is exercised, how the entity, assets and workforce are valued at handover, and how that transfer is priced, because the moment you sit on both sides of it the handover is a related-party transaction with its own tax and transfer-pricing consequences. A BOT arrangement that is precise on the build but vague on the valuation and transfer mechanics stores up its hardest problem for the end. Negotiate the exit at the start.
The entity: why a wholly-owned company
Most GCCs are incorporated as a private limited company that is a wholly-owned subsidiary of the foreign parent, under the Companies Act. It is the cleanest base for the things a captive must do well: employ talent on standard Indian contracts, own and hold intellectual property, and present clear governance to the parent, to auditors and to regulators. Inbound equity into the company is made under the FEMA framework, which for most GCC activity falls under the automatic route, with the usual post-investment reporting.
The alternatives carry trade-offs. A limited liability partnership is lighter to run but a poor fit for an IP-heavy, equity-incentivised centre and for clean parent consolidation. A branch or project office is constrained in what it can do and how it employs, and can raise permanent-establishment and scope questions, so it is rarely the right home for a permanent capability. For a centre meant to last and to scale, the wholly-owned company is the standard for good reasons.
Incorporating the company, in sequence
Standing up the entity follows a defined path: reserve the name and incorporate the private limited company; appoint the board, including at least one resident director as the Companies Act requires; open the bank accounts and bring in the share capital from the parent; make the FEMA reporting on that inflow; and complete the tax and statutory registrations the centre needs to employ and operate. None of these steps is onerous on its own, but they gate the ability to hire and to bill, so they are best run early and in parallel with the real-estate and talent workstreams rather than after them.
Intellectual property: own it cleanly
A GCC usually creates valuable IP, code, designs, research, and where that IP sits is both a commercial and a tax question. The work the captive produces should be owned by or assigned to the right group entity under clear agreements, with employment contracts that vest work product in the company from the moment it is created. This is not housekeeping. How IP is created, owned and developed interacts directly with transfer pricing, because it bears on whether the captive is a routine cost-plus service provider or an entity that contributes to value and should be rewarded for more than its costs. The international framework looks at who performs the development, enhancement, maintenance, protection and exploitation functions, so a captive that genuinely builds IP cannot always be treated as purely routine. Set the IP position at the start, in the contracts, not after the centre is running and the question is being asked in an audit.
Governance and compliance, in brief
A wholly-owned company brings standard obligations: the resident-director and board requirements, registrar filings, statutory audit, and the usual corporate and tax compliance, none of them heavy but all of them real. The point for a foreign parent is to resource them from the outset, because the capability centre that is casual about governance is the one that struggles when it scales, is transferred under a BOT option, or is examined by the tax authority.
A worked example
A US technology company that wants to own its India engineering capability would typically incorporate a wholly-owned private limited company, register it under STPI or as an SEZ unit depending on its export and domestic-sales profile, vest all work product in the company through employment and assignment agreements, and bill the parent on a cost-plus basis under an intercompany services agreement put in place before the first invoice. A company that wants the capability but not the early build risk would instead enter a build-operate-transfer arrangement, let a partner run the centre for two to three years, and exercise an option to acquire the entity and team, with the valuation and transfer pricing of that handover agreed up front. Both end in an owned captive; they differ only in who carries the early risk.
Where this goes wrong
- Outsourcing when you needed a captive. If the work is core and you want the IP and the people, a vendor contract leaves you with neither when it ends.
- A vague BOT transfer. Leaving valuation and the transfer's pricing loosely defined turns the handover into the hardest part of the deal.
- The wrong entity for the job. An LLP or branch for an IP-heavy, ESOP-driven captive creates friction on employment, IP and consolidation.
- IP left unassigned. Work product not clearly vested in and assigned to the right entity is both a commercial risk and a transfer-pricing weakness.
How ATB Corporate helps
We help foreign companies choose the model and stand up the entity: the captive-versus-BOT-versus-managed decision, the incorporation and FEMA position of the wholly-owned company, the IP ownership and assignment framework, and the governance the parent needs. Where a BOT route is used, we structure the transfer and its pricing so the eventual handover is clean rather than contentious, and we align the IP position with the transfer-pricing policy from the start.
Talk to ATB about your GCC model and entity →
FAQ
Captive or build-operate-transfer?
A captive gives the most control and the cleanest IP from day one; BOT lets a partner build and run the centre before transferring it to you, trading some control for speed and a de-risked start. For a capability you intend to keep, the captive is usually the destination, with BOT sometimes the on-ramp; the transfer's valuation and pricing should be agreed at the outset.
What entity should a GCC use in India?
Usually a wholly-owned private limited company under the Companies Act, which is the cleanest base for employment, IP ownership and governance. An LLP or branch is rarely the right fit for a permanent, IP-heavy centre.
Who owns the IP a GCC creates?
It should be owned by or assigned to the appropriate group entity under clear agreements, with employment contracts that vest work product in the company. How IP is owned also affects transfer pricing, because a captive that genuinely builds value may not be treated as purely routine, so it should be set at the outset.
Is the inbound investment automatic under FEMA?
For most GCC activity, equity into the wholly-owned company falls under the automatic route, subject to the usual post-investment reporting. The exact position should be confirmed for the specific activity and sector.
Do we need a resident director?
Yes. A private limited company must have at least one director resident in India under the Companies Act, which is one of the items to arrange early because it gates incorporation and operation.
Key references
Companies Act 2013 (private limited company / wholly-owned subsidiary); FEMA (Non-Debt Instruments) Rules and reporting (FC-GPR); standard build-operate-transfer practice for India captives.
This article is general information and not tax or legal advice. Laws and IFSCA rules change, and positions should be confirmed for your specific circumstances before being relied upon.