Decree 18/2023/ND-CP amending regulations on registration of multi-level marketing business

On April 28, 2023, the government issued Decree 18/2023/ND-CP amending Decree 40/2018/ND-CP on managing business activities by multi-level method. Full text of Decree 18/2023/ND-CP amending Decree 40/2018/ND-CP on managing multi-level business issued by the government.

Basic information of Decree 18/2023/ND-CP amending regulations on registration of multi-level marketing business

• Symbol number: 18/2023/ND-CP
• Document type: Decree
• Date of issue: April 28, 2023
• Effective date: June 20, 2023
• Issuing agency: Government
• Signed by: Le Minh Khai

Contents of Decree 18/2023/ND-CP amending regulations on registration of multi-level marketing business

Decree 18/2023/ND-CP amends and supplements a series of regulations in Decree 40/2018/ND-CP to tighten and improve the management efficiency of enterprises conducting business in the multi-level method, as follows:

Concept of multi-level marketing business

Multi-level marketing businesses are understood as businesses that sell directly to consumers through a network of distributors with many levels and branches. These distributors are paid commissions/income from their own sales results and the sales results of those they sponsor.

Procedures for a multi-level marketing registration certificate and local operation registration documents

Register for multi-level marketing business

According to the provisions of Decree 18/2023/ND-CP to register multi-level marketing businesses, businesses need to follow the following order and procedures:

Step 1: Prepare documents

Enterprises prepare documents to request a certificate of registration for multi-level marketing business, including:

• Required documents,
• 01 copy of Enterprise Registration Certificate,
• 01 list accompanied by a copy of valid personal identification documents;
• 01 copy of legal documents on the establishment of the organization in case of an organization;
• 02 sets of documents related to the multi-level marketing business of the enterprise; 01 list of business goods;
• 01 original deposit confirmation document;
• Documents explaining the technical information system for managing the network of multi-level marketing bidders;
• Documents proving that the enterprise has an electronic information page that meets regulations, documents proving that the enterprise has an information system to receive and resolve questions and complaints from multi-level marketing participants.

This application must be submitted with an electronic copy in the format “.doc” and “.xls”

Step 2: Submit application

After preparing the documents, the enterprise shall send the documents to the Ministry of Industry and Trade directly or by post.

Step 3: Appraisal of documents

After receiving complete and valid documents, the Ministry of Industry and Trade will notify the enterprise to pay the appraisal fee. In case the enterprise does not pay the appraisal fee within 30 days from the date of notification, the documents will be returned.

Thus, compared to before, Decree 18/2023/ND-CP has amended and added several regulations on the registration of multi-level marketing business, specifically as follows:

• Enterprises must add 01 copy of legal documents on the establishment of the organization in case of being an organization
• Technical explanation documents about the information technology system managing the network of multi-level marketing participants must have enough information about the server IP address and physical server location as well as the operating mechanism. of the system, including information describing the system, how to input and store data, and how to manage data along with other information specified in Article 44.
• Documents specified in Clause 4, Article 9 in electronic form must be in “.xls” or “.xlsx” format.

Adding such regulations will tighten the sales business of multi-level marketing businesses, as well as help the state easily manage these businesses, avoiding the situation where businesses take advantage of loopholes to the disadvantage of customers.

Register for local multi-level marketing business

Decree 18/2023/ND-CP has added additional conditions for working contacts of local multi-level marketing enterprises. Accordingly, the focal points must meet the following conditions:

• Not falling into the cases specified in Clause 2, Article 28 of this Decree, specifically: must not be people who are serving a prison sentence or have a criminal record for the crime of producing or trading counterfeit goods, must not be a person who has to participate in multi-level marketing and has been sanctioned for violating regulations on multi-level marketing, are not allowed to be officials or civil servants according to the provisions of law;
• Has been granted knowledge certification according to the provisions of law;
• Authorized by the enterprise to work, and provide information and documents related to multi-level marketing business of the local enterprise at the request of the state management agency on multi-level business.

Decree 18/2023/ND-CP adding additional conditions for multi-level marketing business has increased the professionalism and responsibility of multi-level marketing businesses, ensuring multi-level sales take place transparently and legally, protecting the rights of customers.

Amending and supplementing conditions for registering multi-level marketing business

Decree 18/2023/ND-CP has made amendments and supplements to the conditions for registering multi-level marketing business, to improve transparency in this activity.

Conditions for multi-level marketing participants

To ensure multi-level marketing is transparent, as well as more effective management, Decree 18/2023/ND-CP has added several conditions for multi-level marketing participants, as follows:

• Multi-level sellers must simultaneously meet two conditions: have full civil act capacity as prescribed by law and must reside in Vietnam.
• Foreigners will not be able to participate in multi-level marketing if they do not have a work permit associated with the business that participates in multi-level marketing unless exempted according to the provisions of the law.

Regulations on training in legal knowledge on multi-level marketing

Decree 18/2023/ND-CP also adds several regulations related to submitting applications for recognition of legal knowledge training programs on multi-level marketing, some specific changes are as follows:

• The application for recognition must comply with form No. 13a issued with Decree 18/2023/ND-CP
• When there are any changes in the dossier requesting recognition of a recognized multi-level marketing legal knowledge training program, the training facility must notify the Ministry of Industry and Trade in writing. After receiving the application dossier, the Ministry of Industry and Trade will conduct an appraisal within 30 working days. If the changed information complies with the law and is consistent with the provisions of the Decree, the Ministry of Industry and Trade will recognize the changed information content. In case the changed information violates the law or does not meet regulations, the Ministry of Industry and Trade will not recognize the changed content.

Conditions for position holders

Member of a partnership enterprise, owner of a private enterprise or limited liability enterprise with one member, member of a multiple-member limited liability, shareholder of a joint stock company, and legal representative of the enterprise: Individuals or organizations holding these management positions must not be people who previously held positions at the multi-level marketing enterprise whose certification was revoked. Register multi-level marketing business according to the provisions of Decree 42/2014/ND-CP dated May 14, 2014, of the Government on the management of multi-level marketing business and Decree 18/2023/ND-CP when that business is conducting multi-level marketing business.

This regulation promotes transparency and responsibility of individuals and organizations in participating in the management and operation of multi-level marketing businesses. Eliminating people whose multi-level marketing registration certificates have been revoked helps ensure professionalism and ethics in business operations. In addition, this also ensures that powerful individuals and organizations in the business do not take advantage of their position to carry out illegal activities in the field of multi-level marketing.

Conditions for enterprises with foreign investment capital

Organizations registering for multi-level marketing business that are enterprises with foreign investors or economic organizations with foreign investment as owners or members or shareholders must meet the following conditions: Foreign investors and foreign-invested economic organizations related to this multi-level marketing enterprise must have actual time conducting multi-level marketing business for at least 03 consecutive years in one country or territories in the world.

This regulation creates a barrier for multi-level marketing businesses with the participation of foreign investors or foreign-invested economic organizations. Requiring at least 3 years of operation in the multi-level marketing field helps ensure that businesses with experience and stability in this activity are allowed to participate. This also limits the risk from newly established or inexperienced multi-level marketing businesses, to protect the rights of consumers and ensure multi-level marketing businesses are carried out methodically and systematically.

There is no need for local termination procedures

Multi-level marketing enterprises do not have to carry out procedures to terminate local operations in case of termination of multi-level marketing business nationwide.

This regulation creates favorable conditions for multi-level marketing businesses when deciding to terminate operations nationwide. Previously, when businesses wanted to terminate multi-level marketing business, they had to carry out termination procedures in each locality in which the business operated. This costs businesses time and effort and also increases administrative and management procedures for local authorities. New regulations allow the ending of multi-level marketing business nationwide, helping businesses save time and costs, while also assisting in simplifying administrative processes and creating more favorable conditions for businesses. However, it should be noted that terminating a multi-level marketing business still requires full compliance with legal regulations and ensuring the rights of relevant parties.

Additional conditions for working contacts of local multi-level marketing enterprises

The new point of Decree 18/2023/ND-CP is that it has specified and supplemented conditions for individual representatives of local multi-level marketing enterprises. Previously, Decree 40/2018/ND-CP only stipulated that multi-level marketing businesses were responsible for authorizing an individual residing in the locality to act as a local representative to work on behalf of the business with local state management agencies when there are no local headquarters, branches, or representative offices.

However, according to Decree 18/2023/ND-CP, in addition to authorizing an individual representative, a multi-level marketing enterprise also has the option to appoint an individual residing locally as the focal point to work with local state management agencies when there are no local headquarters, branches, or representative offices. To meet this requirement, the individual representative must meet specific conditions, including not being prohibited by regulations and having been granted knowledge of multi-level marketing business according to regulations.

Adding and specifying these conditions helps increase transparency, and accountability and ensure legitimacy in local multi-level marketing business. This also helps strengthen the management and supervision of state management agencies over multi-level marketing businesses, thereby protecting the rights of consumers and creating fair conditions for businesses to operate in such fields.

Above are the amended and supplemented regulations in the group of regulations on the registration of multi-level marketing businesses. Regulations in the field of operations after registration are presented in the article Decree 18/2023/ND-CP amending regulations on conditions for multi-level marketing business in Vietnam.

Clients who need advice on corporate law, investment law, and multi-level business law, please contact Viet An Law Firm for the best support.