Aircraft Leasing Business In GIFT City: Implementation Of The TCSP And SPV Framework

Introduction

We write in continuation of our previous article (accessible here) on the IFSCA's consultation paper of 17 March 2026 ("Consultation Paper"), through which the IFSCA had proposed a new framework for Trust and Company Service Providers ("TCSPs") under the IFSCA (TechFin and Ancillary Services) Regulations 2025 ("TCSP Regulations") and Special Purpose Vehicles ("SPVs") under the IFSCA (Finance Company) Regulations 2021 ("FC Regulations") for undertaking leasing or financing activities in the IFSC (ie, GIFT City), including aircraft leasing activities.

As discussed in our previous article, the Consultation Paper addressed a structural gap in the existing aircraft leasing ecosystem in GIFT City. While aircraft leasing entities could already be established in the IFSC, aircraft ownership, primary financing, transaction structuring and related professional services could continue to remain outside the IFSC. Following public consultation, the IFSCA has now notified the IFSCA (Finance Company) (Amendment) Regulations 2026 and the IFSCA (TechFin and Ancillary Services) (Amendment) Regulations 2026 (collectively, the "Amendment Regulations"), thereby implementing the TCSP and SPV framework in GIFT City.

Broadly, the new framework establishes an institutional ecosystem for undertaking aircraft leasing activities, wherein TCSPs function as specialised service providers responsible for the incorporation, administration, governance and related fiduciary and support services for SPVs, while SPVs function as transaction-specific vehicles for undertaking such leasing or financing activities. In this respect, the Amendment Regulations retain the broad regulatory architecture proposed under the Consultation Paper, but also contain refinements which are relevant for participants seeking to structure aircraft leasing and financing transactions from GIFT City.

Legal and Regulatory Considerations

1. For an entity seeking to undertake leasing or financing activity in the IFSC as an SPV, we have set out below the key legal and regulatory considerations and the manner in which the notified framework differs from an ordinary Finance Company undertaking leasing or financing activities

1. Legal Structure: An SPV has been defined as a Finance Company incorporated or administered or both, by a TCSP, in such manner as may be specified by the IFSCA, for undertaking permissible activities¹. While a Finance Company may ordinarily be set up as a subsidiary or joint venture, or as a newly incorporated company under the Companies Act 2013 ("Companies Act"), or in such other form as may be specified by the IFSCA, the FC Regulations also permit an applicant intending to undertake one or more non-core activities to be considered for registration as a Finance Company even if incorporated in the form of a Limited Liability Partnership ("LLP") under the Limited Liability Partnership Act 2008 ("LLP Act") or a trust². As the leasing or financing activity undertaken by an SPV has been inserted as a permitted non-core activity under the FC Regulations, this flexibility may also be available to an SPV undertaking such activity.
2. Classification as a Permitted Non-Core Activity: Under the existing FC Regulations, operating lease of aircraft was already recognised as a permitted non-core activity, whereas financial lease fell within the permitted core activities. Importantly, the Amendment Regulations have now introduced a distinct permitted non-core activity for "leasing or financing activity undertaken by an SPV, as permitted by the Authority" ³. This is particularly relevant for aircraft financing transactions proposed to be undertaken through an SPV, since such vehicle may now potentially access the separate minimum owned fund and exemption framework prescribed for an SPV, notwithstanding that the underlying transaction involves financing activity.
3. FATF Compliant of Promoters/Parent Entity: The applicant entity and/or its promoters are required to be from a jurisdiction compliant with the Financial Action Task Force ("FATF") standards and to comply with international standards set by FATF to combat money laundering and terrorist financing⁴.
4. No-Objection Certificate (NOC) from Home Regulator: If the applicant entity, or its parent/promoter entity carries out a regulated financial activity in its home country jurisdiction, then a "No Objection Certificate" from its home country regulatory/supervisory authority is a prerequisite for setting up a Finance Company⁵.
5. Minimum Owned Fund: The minimum owned fund or paid-up share capital of an SPV undertaking leasing or financing activity is required to be equivalent to the amount prescribed under the Companies Act, or such other amount as may be specified by the IFSCA⁶. This provides materially lighter capital treatment than that ordinarily applicable to a Finance Company undertaking core financing activity.
6. Compliance Requirements: While SPVs are exempt from the prudential requirements under R4 and the corporate governance and disclosure requirements under R8 of the FC Regulations, we note that an SPV continues to be a Finance Company and remains subject to the provisions of the FC Regulations which have not been specifically exempted, including Know Your Customer and Anti-Money Laundering requirements under R7 and reporting requirements under R9 of the FC Regulations. Accordingly, the notified framework reduces the compliance burden at the level of the transaction-specific SPV, rather than placing the SPV outside the regulatory framework.

2. For an entity seeking to set up as a TCSP in the IFSC for supporting SPVs undertaking leasing or financing activity, we have set out below the key legal and regulatory considerations:

1. Legal Structure: A TCSP must be incorporated in the IFSC as a company under the Companies Act or an LLP under the LLP Act, or in such other form as may be permitted by the IFSCA⁷.
2. Registration/Approval Requirement: A certificate of registration granted to a TCSP remains valid unless suspended or cancelled by the IFSCA, or voluntarily surrendered by the TCSP and accepted by the IFSCA. This represents a relevant refinement from the Consultation Paper, which had proposed that a TCSP registration would be valid for a period of five years, or such other period as may be specified by the IFSCA, and that an existing TechFin and Ancillary Service Provider desirous of undertaking TCSP services would be required to obtain separate registration.
3. FATF Compliance of Promoters/Partners: All promoters or partners of the applicant entity are required to be from jurisdictions that have not been identified by the FATF as "High-Risk Jurisdictions subject to call for action"⁸.
4. Permitted Activities: A TCSP may: (i) act as an agent for setting up companies, LLPs, trusts or other body corporates; (ii) provide registered office, business, correspondence or administrative addresses; (iii) act as or arrange for another person to act as trustee, director, company secretary, nominee shareholder, partner or designated partner, as applicable; or (iv) undertake any other services as may be permitted by the IFSCA in relation to leasing activities⁹.
5. Eligible Service Recipients: As a general rule, such services may be provided only to non-residents from FATF-compliant jurisdictions. However, a TCSP may provide the services specified under the Fifth Schedule to an SPV established in the IFSC even where such services are undertaken at the request of, or for the benefit of, a person resident in India, provided that the SPV is the primary service recipient¹⁰. The TCSP Regulations further clarify that a person resident in India who sponsors, originates or finances an SPV will not, merely by reason of such association, be considered a service recipient of the TCSP and that the TCSP's contractual and fiduciary obligations are to be rendered only towards the SPV based in the IFSC in accordance with the applicable service agreements.
6. Corporate Governance: TCSPs are required to comply with a governance framework ensuring proper governance, local presence in the IFSC, continuous self-monitoring, and effective regulatory oversight. In this regard, a TCSP is required to: (i) have a governing body in place to formulate its governance framework¹¹; (ii) appoint or designate one of its existing officers as a Principal Officer, responsible for its overall activities, and a Compliance Officer responsible for its compliance function, both of whom shall be full-time and based in the IFSC¹²; and (iii) establish internal audit or independent review mechanisms to assess the adequacy and effectiveness of its internal controls and compliance systems/processes¹³. In addition, the IFSCA is empowered to appoint external auditors to conduct special audits of TCSPs¹⁴.

Concluding Remarks

As discussed in our previous article, the significance of the proposed framework lay in its potential to move aircraft ownership, primary financing, structuring and related professional services into the IFSC. The Amendment Regulations now provide the legal architecture for that structure by enabling leasing or financing activity to be undertaken by an SPV under a lighter entity-level regulatory framework, supported by a regulated TCSP bearing substantive governance, operational and oversight obligations.

The allocation of regulatory responsibility between an SPV and a TCSP is particularly relevant for aircraft leasing and financing structures. An SPV may be used as an asset-owning or financing vehicle with a reduced minimum owned fund and exemptions from the prudential and corporate governance requirements specified under the FC Regulations, while the TCSP is required to maintain the governance, operational, record keeping, conflict management and professional indemnity infrastructure supporting that SPV. This framework may therefore enable a greater part of the aircraft ownership, leasing/financing and related administration structure to be housed in the IFSC, rather than the IFSC entity acting only as a sub-lessor in a structure whose ownership and primary financing remain offshore.

Depending upon the transaction, the framework may be relevant for single-aircraft owning SPVs, portfolio structures, sale and leaseback arrangements involving Indian airlines, financing or refinancing structures and lender led arrangements. In each case, the suitability of an SPV structure would require separate consideration of the intended ownership and funding arrangements, security and enforcement package, applicable foreign exchange and tax requirements, insolvency considerations and the aircraft leasing/financing documentation.

Footnotes

1. R2(1) of the FC Regulations is as follows:

""Special Purpose Vehicle (SPV)" means a Finance Company incorporated or administered or both, by a Trust and Company Service Provider, in such manner as may be specified by the Authority, for undertaking permissible activities;"

2. R3(2) and R3(4) of the FC Regulations are as follows:

"(2) A Finance Company can be set up either as a subsidiary or a joint venture, or as a newly incorporated company under the Companies Act, 2013, or in any other form as may be specified by the Authority from time to time,

Provided that if the parent of a Finance Company is carrying out a regulated financial activity in its home jurisdiction, it shall obtain a No-objection Certificate from its home country regulator for setting up a Finance Company in the IFSCs, wherever applicable.

(...)(4) An application for grant of registration as a Finance Company or a Finance Unit, as the case may be, shall be made by the applicant in the form and manner as specified by the Authority.

Provided that an applicant intending to undertake either one or more non-core activities may be considered for registration as 'finance company' for the purposes of these regulations even if incorporated in the form of a Limited Liability Partnership or a Trust."

3. R5(1)(iii)(ma) of the FC Regulations, inserted by the Amendment Regulations, includes "leasing or financing activity undertaken by an SPV, as permitted by the Authority" as a permitted non-core activity.

4. R3(6) of the FC Regulations is as follows:

"The applicant entity and/or its promoters shall be from a FATF compliant jurisdiction and comply with international standards set by the Financial Action Task Force to combat money laundering and terrorist financing."

5. Proviso to R3(2) and R3(3) of the FC Regulations.

6. Serial no 4 in the Schedule to the FC Regulations.

7. R10C(1) of the TCSP Regulations is as follows:

"The applicant shall be an entity incorporated as a company or limited liability partnership in the IFSC, or in any other form as may be permitted by the Authority."

8. R10C(2) of the TCSP Regulations is as follows:

"All the promoters or partners of the applicant entity shall be from a jurisdiction which has not been identified in the public statement of Financial Action Task Force (FATF) as "High-Risk Jurisdictions subject to call for action"."

9. The Fifth Schedule of the TCSP Regulations is as follows:

"A Trust and Company Services Provider may undertake one or more of the following services for leasing activities permitted by the Authority.

(i) acting as an agent for setting up trusts, companies, limited liability partnerships or any other body corporate;

(ii) acting as or arranging for another person, as the case may be, to act as:

(a) trustee, in case of express trust or performing the equivalent function for any other type of trust;

(b) a director or company secretary or a nominee shareholder, in case of a company;

(c) a partner or a designated partner, in case of limited liability partnerships;

(d) any equivalent person, by whatever name called, in case of a body corporate;

(iii) providing a registered office, business address, correspondence or administrative address for a trust, company or limited liability partnership or body corporate, as may be permitted by applicable law;

(iv) any other services as may be permitted by the Authority."

10. R10H of the TCSP Regulations.

11. R10F of the TCSP Regulations is as follows:

"10 F. Governance and Control

(1) Every Trust and Company Services Provider shall have a Governing Body in place, which shall, inter-alia, formulate a governance framework commensurate with the scale, nature, complexity and risk profile of its activities."

12. R10G of the TCSP Regulations is as follows:

"10 G. Appointment of Principal Officer and Compliance Officer.

(1) Every Trust and Company Services Provider shall appoint a Principal officer and Compliance officer in accordance with regulation 9 of these regulations.

(2) The Principal Officer and Compliance Officer shall be based out of IFSC and shall be a full-time employee of the Trust and Company Services Provider."

13. R10F(2) of the TCSP Regulations is as follows:

"(2) The Trust and Company Services Provider shall establish an internal audit or independent review mechanism, commensurate with the scale, nature, complexity and risk profile of its operations, to inter-alia assess:

(a) adequacy of governance and control framework;

(b) effectiveness of AML/CFT/ KYC systems and procedures;

(c) accuracy and completeness of client and entity records; and

(d) adherence to regulatory approvals and service scope.(...)"

14. R10F(2) of the TCSP Regulations is as follows:

"(...)Provided that the Authority may appoint an external auditor to conduct special audits for such class of Trust and Company Services Provider entities where risk profile so warrants."

15. R10B(2) of the TCSP Regulations is as follows:

"An entity desirous of undertaking Trust and Company Services Provider services shall make an application to the Authority in such form and manner as specified under sub-regulation (1) of regulation 6 of these regulations and as part of the application form, submit a declaration that it shall maintain an arm's length relationship between its activities as Trust and Company Services Provider and other services."

16. R10K of the TCSP Regulations is as follows:

"Every Trust and Company Services Provider shall maintain professional indemnity insurance cover, commensurate with the scale and risk profile of its business, to protect against claims arising from negligence, errors, omissions or breach of duty."

17. R10F(3) of the TCSP Regulations is as follows:

"(3) The Trust and Company Services Provider shall maintain, in physical or electronic form, accurate and upto-date records in respect of:

(a) each legal person or legal arrangement administered;

(b) details of directors, trustees, protectors, partners and nominee shareholders;

(c) trust deeds, constitutional documents, shareholders' agreements and similar instruments, where Trust and Company Services Provider is involved;

(d) services provided, service agreements and duration of engagement."

18. R10I of the TCSP Regulations is as follows:

"10 I. Reporting requirements

(1) The Trust and Company Services Provider shall furnish information relating to its operations to the Authority, in such manner, interval and form, as may be specified by the Authority.

(2) Any financial reporting by the Trust and Company Services Provider to the Authority shall be in US Dollar, unless otherwise specified by the Authority."

19. R10E of the TCSP Regulations is as follows:

"The Trust and Company Services Provider shall ensure that the entity and its principal officer, compliance officer, directors, partners, designated partners, and controlling shareholders are 'fit and proper persons' at all times, in accordance with Regulation 7 of these regulations."

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