Set up MLM Company in Vietnam

SBLaw would like to provide our legal advice on setting up of MLM Company in Vietnam as follows:

1. PRELIMINARILY COMMENT OF SBLAW

We understand that you intend to setup a Wholly Foreign Invested Company (hereinafter referred to as “FIC”) in Vietnam.

We further understand that the FIC shall conduct with trading of goods under the form of Multi Level Marketing Sale.

Under Vietnam Law, in order to setup and operate MLM Company, you must undergo two following steps:

(i) Step 1: Obtaining Investment Certificate to setup FIC;

(ii) Step 2: Obtaining Sub-license for MLM Sale Activities

For your ease of reference, we would like to briefly introduce two steps as herein under.

1.1 Obtainment of Investment Certificate

Under Vietnam Law, in order to setup a FIC, you must apply for an Investment Certificate (“IC”). IC shall be deemed as the Certificate of Incorporation of FIC in Vietnam. IC shall be subjected to the business activities to be carried out by FIC in Vietnam.

With the respect to the importation and trading activities of FIC, according to the Item 1, Article No. 4 of Decree No.23/2007/ND-CP dated 12 February 2007 of the Government providing regulation for implementation of commercial law regarding purchase and sale of goods and activities directly related to the purchase and sale of goods by enterprises with foreign owned capital in Vietnam (Hereinafter referred to as “Decree No.23/2007/ND-CP”), foreign investors who satisfy following conditions shall be entitled to license for activities of trading in Vietnam:

It is an investor belonging to a country or territory participating in an international treaty of which the Socialist Republic of Vietnam is a member and in such treaty Vietnam has undertaken to open the market on activities of purchase and sale of goods and activities directly related to purchase and sale of goods;

The form of investment is consistent with the schedule/s undertaken in international treaties of which the Socialist Republic of Vietnam is a member and is consistent with the law of Vietnam;

The goods and services in which business is conducted are consistent with Vietnam’s undertaking to open the market and are consistent with the law of Vietnam;

The scope of operation is consistent with Vietnam’s undertaking to open the market and is consistent with the law of Vietnam;

It has approval from the State body authorized in Vietnam.

In addition, under Vietnam WTO’s Commitments, from the year of 2009, foreign investor is entitled to join goods import and trading activities in Vietnam. Philippine has been a member of WTO. Thus, Electro Group Inc., is entitled to setup a FIC for importing and trading home based water purifier in Vietnam.

With the reference to road map for obtaining IC, it can be described as follows:

Preparing the application dossier: We shall collect necessary information and documents from you. Upon receipt of necessary information and documents from you, we shall translate documents from English into Vietnamese and prepare the application dossier under the standard forms. The initial drafted application dossier shall be sent to you for your comments. Then, after updating the application dossier based on your comments, we shall obtain the preliminary comments from the competent authority and send the finalized application dossiers for you to sign and seal. We anticipate that this phase shall be completed within 10 working days. The prepared documents shall then be sent to you for review, signing and seal.

Submission of application dossier: Within 02 working days from receipt of duly signed and sealed application dossier, we shall submit the application dossier to the competent authority. It shall take about 3-4 months from submission of application dossier for the provincial licensing authority to grant the IC.

Post licensing: Within 13 working days we shall complete the post licensing procedures such as placing establishment of FIC on News Paper, Tax code registration and obtaining Seal Sample.

1.2.Obtainment of Sub-License for Multi Level Marketing Sale

Upon completion of obtainment of IC, the FIC must further carry out with necessary procedure for obtaining Sub-License for Multi Level Marketing Sale in Vietnam.

In line of Vietnam Law, Multi Level Marketing Sale must satisfy following conditions:

a.The marketing to retail goods is conducted through a multi-level and multi-branch network of participants in the multi-level sale;

b.Goods are marketed by participants in the multi-level sale directly to consumers at the customers’ homes, working places or other places other than regular retail places of the enterprises or participants;

c.Participants in the multi-level sale enjoy commissions, bonuses or other economic benefits from the sale results of their own and of lower-level multi-level sale participants within the network which is organized by them and approved by the multi-level sale enterprises.

Vietnam Law also further require that before obtainment of sub-license for Multi Level Marketing Sale, the New Co must pay a deposit which is equal to 5% of its charter capital and must not be lower than VND one billion (about 500,000USD) at a commercial bank operating in Vietnam.

With the reference to road map for obtaining MLM License, it can be described as follows:

Preparing the application dossier: We shall collect necessary information and documents from you. Upon receipt of necessary information and documents from you, we shall translate documents from English into Vietnamese and prepare the application dossier under the standard forms. The initial drafted application dossier shall be sent to you for your comments. Then, after updating the application dossier based on your comments, we shall obtain the preliminary comments from the competent authority and send the finalized application dossiers for you to sign and seal. We anticipate that this phase shall be completed within 15 working days. The prepared documents shall then be sent to you for review, signing and seal.

Submission of application dossier: Within 02 working days from receipt of duly signed and sealed application dossier, we shall submit the application dossier to the competent authority. It shall take about 3 months from submission of application dossier for the provincial licensing authority to grant the MLM License.

1.3.Other conditions that you should be aware:

MLM Sale Activities is rather new in Vietnam. Until the end of 2005 Vietnam firstly introduced regulation on MLM Sale Activities.

Due to that, Vietnam Government still reserves a restrained view on MLM Sale Activities due to the complexity of this form. According to our practical experience on this, several foreign MLM Company have been welcomed such as Herbalife, Amway, Nuskin, Bhip… and they keep rapidly developing in Vietnam. Vietnam Government is now also planning to adopt new regulation on MLM Sale Activities, in which, the deposit amount in a commercial bank probably be increased to five billion Vietnam Dong (about 2,5 million US Dollar)…

Following key factors should be carefully considered:

– Capital: Under Vietnam Law, the minimum capital required is about 500,000USD. However, in practice, in order to obtain license for MLM, you should consider to invest at least from 6 million to 8 million US Dollar;

– Parent Company must have positive business operation result in at least 02 recent years. This must be evidenced by audited Financial Statements for 02 recent years.

– Parent Company must be experienced in the field at least 05 years.

– Head office address of the FIC in Vietnam must be compliant with master plan of Vietnam.

2.     Scope of works

Generally, with regard to establishment of FIC in Vietnam, our scope of work shall be as follows:

3.       Our delivarables

The Deliverables will include documents prepared in English and Vietnamese as required for submission to licensing bodies.

You will review, approve and where necessary sign these documents.