LEGAL REGULATIONS ON MULTI-LEVEL SALES LICENSES IN VIETNAM

Multi-level marketing is a legal form of sales. Sales are carried out by a network of many sales people at many levels and many different branches. Multi-level marketing must be carried out in accordance with the provisions of law. Celigal Lawyers will answer this issue more deeply through the following article.

I. Subjects of Multi-Level Marketing (MLM) Business

According to Article 4 of Decree 40/2018/ND-CP, multi-level marketing activities are only permitted for goods. All multi-level marketing activities involving subjects other than goods are strictly prohibited, unless otherwise stipulated by law.

II. Goods Prohibited from Multi-Level Marketing

Pursuant to Clause 2, Article 4 of Decree 40/2018/ND-CP, the following goods are not allowed to be distributed through multi-level marketing:

a. Goods such as medicines; medical equipment; veterinary medicines (including aquatic veterinary drugs); plant protection products; chemicals and substances for insecticide and disinfection that are restricted or banned for household and medical use, and other hazardous chemicals;

b. Digital content products.

III. Conditions for Multi-Level Marketing (MLM) Activities

Conditions for Registration of MLM Activities:

According to Article 7 of Decree 40/2018/ND-CP, organizations registering for MLM activities must meet the following conditions:

a. Must be an enterprise established in Vietnam under the law and have never had its MLM registration certificate revoked.

b. Have a charter capital of at least 10 billion VND.

c. Key personnel, including partners in partnerships, owners of private enterprises or single-member LLCs, members of multi-member LLCs, founding shareholders of joint-stock companies, or the legal representatives of enterprises, must not include individuals or entities previously associated with MLM enterprises whose certificates were revoked under Decree 42/2014/ND-CP or Decree 40/2018/ND-CP.

d. Maintain a deposit at a commercial bank or a branch of a foreign bank in Vietnam, as required under Clause 2, Article 50 of Decree 40/2018/ND-CP.

e. Possess clear and transparent documents, including MLM participant agreements, rules of operation, compensation plans, and basic training programs compliant with the decree.

f. Have an IT system to manage the MLM network and a website providing information about the company and its MLM activities.

g. Operate a communication system to handle inquiries and complaints from MLM participants.

Conditions for MLM Participants:

Per Article 28 of Decree 40/2018/ND-CP, MLM participants must be individuals with full civil capacity as defined in Article 19 of the 2015 Civil Code.

Prohibited from Participating in MLM:

Clause 2, Article 28 of Decree 40/2018/ND-CP specifies individuals not allowed to join MLM, including:

a. Those serving prison sentences or with convictions for certain crimes (e.g., producing counterfeit goods, fraudulent advertising, fraud, misuse of trust).

b. Foreign nationals without a work permit in Vietnam, unless exempt by law.

c. Individuals previously fined for violations under Clauses 2, 3, and 4, Article 5 of Decree 40/2018/ND-CP, whose penalties are still valid.

d. Individuals listed in Point c, Clause 1, Article 7 of the decree.

e. Civil servants and officials as defined by the Law on Public Officials and Civil Servants.

IV. Procedure for Issuing an MLM Registration Certificate

a) Application Documents:

As stipulated in Article 10 of Decree 40/2018/ND-CP, the application includes the following certified documents:

- Application form (Form No. 01 in the annex to the decree).

- A copy of the enterprise registration certificate or equivalent legal documents.

- A list of individuals specified in Point c, Clause 1, Article 7, along with valid identification documents.

- Relevant MLM business documents:

• MLM participant agreement;

• Compensation plan; 

• Basic training program; 

• Rules of operation.

- List of goods for MLM with details (name, type, origin, packaging, warranty, price, reward points, etc.).

- Original deposit confirmation document.

- Technical documentation of the IT system for managing MLM participants.

- Evidence of a compliant website.

- Evidence of a communication system for handling inquiries and complaints.

b) Procedure:

Step 1: File Submission: Submit the application to the Ministry of Industry and Trade (MoIT) via direct submission or mail, including electronic files. MoIT reviews the application within 5 working days. Incomplete applications will require revision within 30 days, or they will be returned.

Step 2: Application Review: MoIT verifies documents, ensures compliance with regulations, and confirms the deposit authenticity within 20 working days. Enterprises may be asked to revise their applications once.

Step 3: Certificate Issuance: If conditions are met, MoIT issues the MLM registration certificate and notifies relevant authorities and banks.

Step 4: Public Announcement: MoIT publishes the information on its website and notifies provincial departments and banks within 10 working days of issuing the certificate.

V. Capital and Deposit Requirements for MLM Licensing

In the field of business in general as well as the field of MLM in particular, businesses must have a good financial foundation. To be granted a business license, not only does the business require capital, but the law also has very strict regulations on deposits. Because, based on the provisions of Article 7 of Decree 40/2018/ND-CP, among the conditions for multi-level sales registration, businesses must meet the following conditions:

First, charter capital is 10 billion VND or more.

Second, Deposit money at a commercial bank or foreign bank branch in Vietnam according to regulations

Pursuant to Article 50 of Decree 40/2018/ND-CP, Deposit is an amount of money that ensures the fulfillment of obligations of multi-level marketing enterprises to multi-level marketing participants and the State in cases of in accordance with the provisions of Clause 1, Article 53 of Decree 40/2018/ND-CP.

Deposit procedures:

Step 1: Multi-level marketing enterprises are responsible for opening an escrow account and depositing an amount equivalent to 5% of charter capital but not less than 10 billion VND (ten billion VND) at a commercial bank or branch. Foreign bank branches in Vietnam.

Step 2: Confirm the deposit: The bank where the enterprise deposits the deposit confirms in writing the deposit of the multi-level marketing enterprise according to Form No. 17 in the Appendix issued with Decree 40/2018/ND- CP and is responsible for coordinating in confirming the contents related to the deposit confirmation document when requested by the Ministry of Industry and Trade. The deposit is blocked by the bank for the duration of the enterprise's operation and Can only be withdrawn and used when available written consent of the Ministry of Industry and Trade, except for the case specified in Point a, Clause 1, Article 51 of Decree 40/2018/ND-CP.

Benefits of deposit for businesses: Multi-level marketing businesses are entitled to interest on the deposit according to the agreement with the bank and are allowed to withdraw interest from the deposit.

Above are some shares of Celigal Law Firm about the provisions of law on multi-level business conditions, order and procedures for applying for a multi-level sales registration certificate. If you encounter any difficulties related to the legal field, please contact us. We are confident that we are one of the Law Firms providing the best legal services to our clients.