TSA Pre-Signing Review
Price the Indian TSA before you sign.
We scope the consent and registration reality into the TSA while you still hold leverage. Fixed-fee proposal in 48 hours. The first conversation is always free.
A TSA carve-out in India runs differently from Europe because there is no general automatic employee transfer. The carve-out India playbook turns on consent based moves, Provident Fund and ESI continuity, state level registrations, and the Digital Personal Data Protection Act. The work belongs inside the broader carve-out advisory plan, and in India the entity and registration setup sets the timeline more than the technology does. The buyer that assumes a European style transfer plans the wrong Day One.
India has no general automatic transfer of undertakings in the European sense. In a business or asset carve-out, employees usually resign from the seller and are rehired by Newco on agreed terms. That makes the employee population a negotiated outcome, not a legal certainty, and consent becomes a live commercial risk the buyer manages from the start.
For employees who qualify as workmen, the Industrial Disputes Act adds protection. A transfer that does not preserve continuity of service and terms can require notice and compensation, and certain establishments need permission before retrenchment. The buyer maps which employees fall into the workman category and structures offers so continuity of service and accrued benefits are preserved where the law requires.
India has consolidated much of its labour law into new codes covering wages, industrial relations, social security, and occupational safety. Implementation has been phased and varies, so the buyer confirms which rules are in force in the relevant states at the time of the deal rather than assuming a single national position.
Because the transferring population depends on acceptance of offers, the buyer plans retention around the engineers, managers, and specialists Newco cannot afford to lose, and builds the offer timeline into the closing plan.
Indian payroll runs on several statutory pillars. The employer registers for the Employees Provident Fund and contributes alongside the employee, registers for the Employees State Insurance scheme where applicable, and deducts tax at source from salaries. Professional tax applies in several states, and gratuity accrues as a defined benefit for longer serving employees.
Provident Fund continuity is a sensitive point in a consent based move. Employees care about preserving their accumulated balances and unbroken membership, and a clumsy transfer can trigger resignations. The buyer designs the Provident Fund treatment, whether a transfer of accumulations or continued membership, as part of the offer rather than an afterthought.
Because Newco often needs new registrations under each of these schemes, a compliant payroll is rarely ready for Day One. Most buyers take a seller run payroll TSA for several cycles, then cut over once the entity, the Provident Fund and ESI registrations, and the tax setup are confirmed.
The buyer holds the payroll TSA to cost-plus or fixed-fee with audit rights and a firm exit date, the same discipline applied in every jurisdiction.
India enacted the Digital Personal Data Protection Act to govern the processing of digital personal data. As its rules come into force, it sets obligations on notice, consent, security safeguards, and breach handling, with a data protection board for enforcement. A carve-out treats Indian personal data as a regulated asset rather than relying on the older and lighter framework.
During the TSA the seller processes Newco personal data in shared systems, so a processor arrangement with security obligations and a deletion duty at exit is essential. The DPDP framework allows cross border transfers subject to government restrictions on specified destinations, so the buyer confirms where support and data sit and documents the transfer basis.
Because India is a major delivery base for shared services, the same systems often serve other parts of the seller group. The buyer separates Newco data cleanly and avoids a configuration where the seller retains visibility of Newco records after exit.
The migration itself warrants an impact assessment and a documented security baseline, both as compliance and as the evidence trail a regulator would expect.
Newco usually needs a registered Indian entity before it can employ staff and trade, with company registration, a permanent account number, tax deduction accounts, and GST registration. Each of the social security schemes carries its own registration, and many compliance points run at state level under the relevant Shops and Establishments Act. The setup is a sequence of dependencies that takes real time.
State variation is a defining feature of an Indian carve-out. Professional tax, labour welfare obligations, and certain registrations differ across states, so a carve-out spanning several locations multiplies the touchpoints rather than repeating one process. The buyer maps each state where the business operates and confirms the local requirements early.
Foreign exchange rules add another layer where money moves across the border. Payments under the TSA, capital injections into Newco, and intercompany charges need to follow the applicable exchange control regime, which the buyer factors into the cash and pricing plan.
Because all of this takes months, the seller TSA in India tends to run longer than a buyer used to a European transfer would expect. The buyer prices that reality rather than assuming a fast exit.
The Indian TSA scope typically covers payroll, IT and identity, finance, and shared service delivery, each with a clear description, a service-level expectation, and a price held to cost-plus or fixed-fee. The buyer insists on line item pricing because seller cost allocations can bury group overhead that does not belong to Newco.
Cutover is sequenced and gated. Payroll cuts at a month boundary once the entity, registrations, and offers are settled, IT after a tested migration, finance at a period close. Each step has a reconciliation gate and a rollback path so a single failure does not spread across the separation.
Cost discipline depends on doing the work before signing. The buyer benchmarks seller charges, removes unjustified mark-up, and sets exit fees that decline across the term. India often offers competitive seller delivery costs, but that is no reason to accept open ended dependency or unscoped charges.
A disciplined Indian separation leaves Newco operating its own registered entity, its own payroll and statutory schemes, and its own systems and data, with the seller dependency closed on agreed terms. That outcome starts with a pre-signing review that scoped the TSA before leverage shifted to the seller.
No. India has no general automatic transfer of undertakings. Employees usually resign from the seller and are rehired by Newco on agreed terms. For workmen, the Industrial Disputes Act gives transfer or termination protections including continuity of service, notice, and compensation unless conditions are met.
Newco registers for Provident Fund and ESI, deducts tax at source, and handles professional tax and state level requirements under each Shops and Establishments Act. Provident Fund continuity matters to employees, so most buyers run a seller payroll TSA until registrations and transfers are complete.
The Digital Personal Data Protection Act is India's data protection law, with obligations on consent, notice, and security as it comes into force through its rules. A carve-out treats employee and customer data, the seller processor role, and any cross-border transfer as a controlled workstream.
Newco usually needs a registered Indian entity with the relevant tax, GST, Provident Fund, and ESI registrations before it can employ and operate. These take time, which is one reason the seller TSA in India tends to run across several months rather than a fast cutover.
Automatic transfer under the Employment Act, CPF payroll, and the PDPA.
Read the article →TUPE transfer, PAYE and pensions, and a clean cutover in the United Kingdom.
Read the article →The framework for sequencing a carve-out across multiple jurisdictions.
Read the article →The 90-day governance, IT, finance, HR and procurement separation plan we run on live carve-outs. Get the playbook plus the bi-weekly Day One Letter — short, signal-heavy, buyer-side.
No spam. Unsubscribe in one click. · Read the overview first →
We scope the consent and registration reality into the TSA while you still hold leverage. Fixed-fee proposal in 48 hours. The first conversation is always free.
Seven buyer-side moves to exit a Transition Services Agreement on time and below budget. The mark-up, the extension-fee curve, exit sequencing, and the 11-month calendar.
One tactic, one benchmark, or one pattern from a recent buyer-side engagement. Short. Signal heavy. Free.
Subscribe to The Day One Letter →