1. Introduction: Why Companies Close Entities (But Want to Keep Talent)
Mid‑sized Singaporean firms (500–2,000 employees) may decide to close a company in India as part of cost-cutting, strategic restructuring, or pivoting in Asian markets. But your local team—who understands market dynamics, relationships, and operational context—is invaluable to ongoing regional success.
Instead of letting talent walk away, you can use an Employer of Record (EOR) India solution to retain employees without entity, hire in India without entity, and smoothly manage employee transfer after entity closure. This guide walks you through the legal roadmap, potential pitfalls, and how EOR ensures your workforce stays intact.
2. What Happens When You Close a Company in India
A. Legal & Compliance Steps
Shutting down your Indian entity involves:
- Board resolution and initiation of strike-off or winding-up
- Clearance of liabilities: taxes, employee dues, statutory funds
- File winding-up petition via NCLT for liquidation, or strike-off via ROC for solvent entities
- Tax clearance and final settlement of PF/ESI/gratuity for employees
- Official deregistration once all compliance obligations are cleared
This legal closure process typically spans 6–12 months, depending on complexity and state-level jurisdiction.
B. Employee Obligations: Notice, Severance & Benefits
India’s Industrial Disputes Act and Labour Code require:
- Notice period: usually 30–90 days, dependent on contract or local state law
- Retrenchment compensation:
- Workmen: 15 days’ average pay per year of service (post 1 year service)
- Non‑workmen: governed by contract and Shops & Establishments rules
- Gratuity (for 5+ years of service): 15 days’ average salary per year of service
- Final settlement: includes unused leave, notice pay, retrenchment, gratuity—usually processed within a week
- Industrial dispute procedures: for layoffs involving over 100 employees or in factories, government approval needed
Failure to adhere can result in legal disputes, fines, or reinstatement orders.
3. Risks of Talent Loss During Entity Closure
- Operational disruption: critical knowledge exits with employees
- IP and client relationships at risk
- Re-entry costs: rebuilding a vetted team later is time-consuming and expensive
- Service downgrade: project handoffs may suffer without continuity
4. Retaining Employees Without a Legal Entity: What Are Your Options?
| Option |
Pros |
Cons |
| Contractors/Freelancers |
Easy to set up |
Misclassification risk; no benefits; lower loyalty |
| Set up new entity |
Full legal control |
3–6 months setup; expensive; complex statutory registration |
| Employer of Record (EOR) |
Fast, compliant, low risk |
Requires trusted partner like AYP; legally sound and efficient |
The EOR model enables you to retain employees without entity, hire in India without entity, and handle employee transfer after entity closure efficiently—with minimal disruption.
Check out AYP’s Employer of Record India solution.
5. How EOR Helps You Retain Employees in India
What an EOR Does (Clearly Explained)
AYP becomes the legal employer of record, handling:
- Labour-compliant contracts
- Payroll, taxes, PF/ESI/gratuity
- Notice handling and termination compliance
- HR admin, onboarding, employee helpdesk support
You retain full operational control, while AYP manages compliance and legal aspects.
Transition Process: Step by Step
- Planning: Identify key staff to retain
- Terminate legally: Issue notice or pay-in-lieu
- Onboard with AYP: Employees switch cleanly to EOR contracts
- Ensure continuity: Salaries, benefits, tenure remain intact
- Operate seamlessly: You handle outputs; AYP ensures compliance
This ensures comprehensive employee transfer after entity closure with zero talent leakage.
Why AYP?
- Onboarding in 1 business day
- Expertise in Indian labour law and state regulations
- ISO-certified regional EOR provider
- Proven track record: risk-free, compliant transitions
Learn more through our EOR India page.
6. Case Study: Full Retention During Closure
Company: Singapore-based SaaS provider
India team: 20 developers and support staff
Reason: Strategic reorganisation, but maintain product continuity
Solution: Engaged AYP EOR before termination notices
Outcome:
- 100% staff retention under AYP
- Compliance: notice, ESI/PF, gratuity paid
- No interruption to product roadmap
- Entity liquidated smoothly in 9 months
“AYP helped us close our India entity while retaining our core team and keeping our roadmap on track.” — Regional HR Director
7. Key Considerations Before You Close an Entity
- Timing: Initiate EOR transfer before issuing termination notices
- Compliance: Ensure 30–90 day notice, retrenchment compensation, gratuity, PF/ESI settlements; follow correct process for layoffs >100 or in factories
- Communication: Be transparent about continuity, benefits, and EOR structure
- HR Preparation: Finalise payroll, confirm PF/ESI/gratuity records, and prep employee data for transfer
8. Conclusion: Close Your Entity, Keep Your Talent
You can confidently close a company in India while retaining talent using an Employer of Record:
- Cut operational and compliance costs
- Preserve institutional knowledge and customer trust
- Remain fully compliant with labour and tax law
- Maintain readiness for future growth or re-entry
With AYP's EOR in India, you can hire in India without entity, retain employees without entity, and execute employee transfers after entity closure—seamlessly and legally.
9. Call to Action: Speak to AYP’s Local Experts
Ready to close your Indian legal entity but keep your team intact?
✅ Book a free EOR + entity closure consultation
✅ Get a complimentary cost simulation
✅ Discover how AYP can onboard your staff in days, not months
Retain Your Team Without a Local Entity →
