1.

Background:
1.1 The client which is Lyft. Inc. (the client) which is incorporated in San- Francisco.
The client is running a taxi cab on demand chain which is run by a mobile phone
application compatible with smart phones and takes its customers to their desired
destination in a stipulated time, the company partners with independent drivers
and taxi drivers and the driving partners are supposed to pay the company a
certain commission from the money they earn from each ride. Now the client
wants to enter the Indian sub-continent and bring their business to India and they
wish to know how should they bring their business to in India and what are the
benefits and what all procedures are there to get registered in India?
1.2 Further the client also wants to be able to offer their customers a “lyft wallet”
through which the customers will be able to add money from their bank account to
their lyft wallet, the aim of offering this feature is for the customers of the client to
give them a faster method to being able to pay for their rides and not carry out the
cumbersome process of paying every time they reach their destination by using
their card or other forms of e-wallets which will further reduce their time and
provide them ease of payment for their ride. The currency used for payment is
assumed to be in Indian Rupees (INR) The customer using the lyft wallet will not
be able to use the balance in the lyft wallet for transacting with other businesses
and will only be able to pay for his taxi rides with the client’s company
exclusively. The lyft wallet is not the only way of payment after the completion of
the ride, there exist other standard options such as payment by cash and other
forms of acceptable payment such as usage of a credit card or other open system
wallets (an open system PPI is to be understood as a system where the consumer
can use the wallet for all kinds of payments and there exists no exclusivity). The
client wanted to know if such a feature could be offered to the customers under
Indian law and what all licenses and registrations are they required to comply
with?
DISCLAIMER
ALL THE RESEARCH IS DONE TAKEN INTO CONSIDERATION THE INDIAN
LAWS AND LEGISLATIONS.
ALL THE INOFRMATION PRIOVIDED BY THE MEANS OF THIS MEMO ARE
CONFIENTIAL IN NATURE.
ALL THE INFORMATION TO THIS DOCUMENT IS PRIVY TO THE
MEMBERS OF THE FIRM AND THE CLIENT ONLY.

2. Applicable law:
Under this heading I will talk about what all laws are applicable to the present
situation which are applicable to both the issues.

2.1 The law used in deciding to incorporate or not is the Companies Act of 2013.
There are a lot of sections involved which explain that when a new company
incorporates in the Indianan sub-continent it is creating a separate legal person
which is free from the misfortunes of the personnel of the company and is
 perpetual in existence. All these points are covered under the section 9 and various
other sections of the Companies Act of 2013
2.2 Pre-paid Payment Instruments (further referred as PPI):
A PPI as explained under the master directions of the Reserve Bank of India
(RBI) is defined under as “Prepaid payment instruments are payment instruments
that facilitate purchase of goods and services against the value stored on such
instruments. The value stored on such instruments represents the value paid for by the
holder, by cash, by debit to a bank account, or by credit card.”1
There are classified under four different types of PPI systems
 Closed system
 Semi-closed system
 Semi-open system
 Open system

The client is covered under the ambit of a closed system, which is defined under
the master directions of the RBI as “These are payment instruments generally
issued by business establishments for use at their respective establishment only.
These instruments do not permit cash withdrawal or redemption.”2
The above stated definition means that since the client only wants its customers to
use the lyft wallet for the purpose of paying for the taxi ride and not any other
establishments thus making the lyft wallet an exclusive payment option for the
mobile application.
2.3 The clause 10.1 of the master directions by the RBI raises the issue regarding
the dishonour of customer instructions for payments, if there arises an instance
between the customer and the client where the customer has insufficient balance
outstanding against the mobile application.
Also in the case of the PPI system being discontinued by the RBI or the offer of a
PPI feature being shut down by the client under any circumstances result in the
customer using the service to redeem the balance outstanding within the expiry
date. Further
2.4 Further coming on to the points of penalties which stated under the Payment
and Settlement Systems act of 2007 (PSS)Chapter VII of the act covers all the penalties there
are in association with non-compliance of the guidelines laid down by RBI in regards of PPI.
Section 29 of the act states that there can be imprisonment for a term which shall not be less
than one month but which may extend to ten years or with fine which may extend to one
crore rupees or with both and with a further fine which may extend to one lakh rupees for
every day, after the first during which the contravention or failure to comply continues if the
person who under the process of still getting an authorisation from the RBI which is a time
period of six months or more and the applicant for the authorisation starts the commercial
usage of the mobile application in the meantime the authorisation by the RBI is pending.
1
Master directions for issuance and operation of Prepaid Payment Instruments in India, point 2.3
2
Master directions for issuance and operation of Prepaid Payment Instruments in India, point 2.4
Further under section 27 of the act it is mentioned that if any company commits an act which
is in contravention of any provision of the PSS, the acts committed will be considered
committed under the full knowledge and support of the managerial head of the company, and
the person will be found guilty and dealt with accordingly taking into consideration the
magnitude of the acts committed by him, unless he proves the act was committed without his
knowledge he will be considered a convict too.
3. Analysis
3.1 The issue of whether incorporation is a viable option or not?
The benefits associated with incorporation of a foreign company in the Indian sub-
continents are as follows
 Independent legal entity:
As explained under the section 9 of the companies act of 2013 the clients
company if it incorporates in India is going to be registered under a
separate legal title and will have complete legal control over the
administration of the company also the company will get its own seal and
there will be no disputes regarding the ownership of the company. Also a
major advantage is that the company will be free from all the personal
misfortunes of the members of the company.
 Limited liability:
The clients company will incorporate in the form of a Limited Liability
Partnership or Company (LLP/C). Thus under Indian law creating a
completely separate legal entity which has the status of an artificial person.
Which in turn limits the liabilities of the client and in the unfortunate event
of winding up the company all the debts will be in the name of the
company and not the client thus limiting the liability quotient by large
number.
 Perpetual succession:
As mentioned in the section 9 of the companies act of 2013 the company
since existing as an artificial entity cannot like human persons die thus
making it a perpetual being and the directors of the company can change
with time and years but the existence of the company is perpetual.
 Ease in control and management:
The company law provides for the management of companies through the
elected representatives of the members known as directors. The directors
may include professionals thereby enabling the company to be managed
professionally and more efficiently.
3.1.1 the process for incorporation is mentioned as follows:
• Select, in order of preference, at least one suitable name upto a maximum of six names,
indicative of the main objects of the company.
• Ensure that the name does not resemble the name of any other already registered
company and also does not violate the provisions of emblems and names (Prevention of
 Improper Use Act, 1950) by availing the services of checking name availability on the
portal.
• Apply to the concerned Registrar of Companies (RoC) to ascertain the availability of
name in eForm1 A by logging in to the portal. A fee of Rs. 500/- has to be paid alongside
and the digital signature of the applicant proposing the company has to be attached in the
form. If proposed name is not available, the user has apply for a fresh name on the same
application.
• After the name approval the applicant can apply for registration of the new company by
filing the required forms (that is Form 1, 18 and 32) within 60 days of name approval
• Arrange for the drafting of the memorandum and articles of association by the solicitors,
vetting of the same by RoC and printing of the same.
• Arrange for stamping of the memorandum and articles with the appropriate stamp duty.
• Get the Memorandum and the Articles signed by at least two subscribers in his/her own
hand, his/her father's name, occupation, address and the number of shares subscribed for
and witnessed by at least one person.
• Ensure that the Memorandum and Article is dated on a date after the date of stamping.
• Login to the portal and fill the following forms and attach the mandatory documents
listed in the eForm
Declaration of compliance - Form-1
Notice of situation of registered office of the company - Form-18.
Particulars of the Director's, Manager or Secretary - Form-32.
Submit the following eForms after attaching the digital signature, pay the requisite filing and
registration fees and send the physical copy of Memorandum and Article of Association to
the RoC
• After processing of the Form is complete and Corporate Identity is generated obtain
Certificate of Incorporation from RoC.
Additional steps to be taken for formation of a Public Limited Company:
To obtain Commencement of Business Certificate after incorporation of the company the
public company has to make following compliance
• File a declaration in eForm 20 and attach the statement in lieu of the prospectus
(schedule III) OR
• File a declaration in eForm 19 and attach the prospectus (Schedule II) to it.
• Obtain the Certificate of Commencement of Business.
Additional steps to be taken for registration of a Part IX Company:
The Part IX Company is required to file eForm 37 and eForm 39 apart from filing eForm 1,
18 and 32.
The company is required to file eForm 1 first and then the company can file all the other
eForms (18, 32, 37 and 39) simultaneously or separately

3.2 The issue of licenses and registrations which are required in order to run a closed
PPI system which is used as a method of payment and is it permissible by the laws
of the country?
The RBI has laid down detailed guidelines for registering and issuance of a closed
system PPI which is congruous with the needs and requirements of the client
 which is planning to offer its customers which an easy payment option for the
customers after the completion of the ride known as the Lyft wallet this feature is
exclusive only for the mobile application which is regulated by the client. For the
Lyft wallet feature to work in the Indian scenario there are licenses and other
forms of registrations which are to be obtained before starting the use of the Lyft
wallet, they are the master directions of issuance of draft guidelines for issuance
and operation of Prepaid Payment Instruments in India. All non-bank entities
proposing to issue such instruments, unless otherwise specifically exempted as per
the guidelines, shall seek authorization from the Reserve Bank of India, under the
Payment and Settlement System Act 2007. Thus according to this guideline it is to
be understood that the client is supposed to maintain all standards mentioned and
required by the act and follow standardized procedure for the functioning of the
Lyft wallet. There is also mention of some sort of exemption from authorisation in
the case of a closed system PPI, A closed system payment instrument shall have a
maximum value of Rs 5000/- only. These instruments cannot be used for purchase
of another prepaid payment instrument. Amounts collected under the scheme shall
be exempt from the provisions of deployment of money collected provided the
value of outstanding instruments does not exceed Rs 50 lakhs or 10% of the
issuers' net owned funds, whichever is lower. Entities issuing such instruments
shall inform Reserve Bank of India when they start operating such schemes. Half
yearly audited statement shall be submitted to the Reserve Bank by such entities
indicating the total value of instruments issued during the period and the value
outstanding as at the end of the period.
4. Conclusion :
Thus on a persuasive and advisory note is better to get the company incorporated in
India rather than not incorporating and running the business as a foreign company and
it is certainly possible to offer the customers of the client the option of payment
through lyft wallet and there are registrations and other guidelines which need to be
followed as laid down by the RBI and the PSS.