We understand that you intend to setup a Wholly Foreign Invested Company (hereinafter referred to as “FIC”) in Vietnam. SBLAW provides you some information about legal procedure about setting up company of trading of functional food 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.
I.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. Malaysia has been a member of WTO. Thus, Client is entitled to setup a FIC for importing and trading functional food products in Vietnam.
For your information, we would like to note that possibility of obtaining Investment Certificate in this case shall be very much depended on following factors:
- Experience in the field of Client: Trading Activities is classified into conditional investment sector under Vietnam Law. Accordingly, before granting Investment Certificate for Foreign Investor to join Trading Activities in Vietnam, the Licensing Authority must consult and obtain approval from many Ministries including Ministry of Planning and Investment, Ministry of Industry and Trade, Ministry of Finance. In some case, with respect to special products to be traded, Ministry of Health, Ministry of Construction etc can also involve in the licensing process. This cause the Licensing Process for setting up a Foreign Owned Trading Company in Vietnam last in long time and become complex. In some case, it can take about 02-03 months to consult the relevant Ministries on the application dossier of the Foreign Investor. According to our experience in similar previous case, generally, Ministries shall be very much interested on experience of the Foreign Investor in the same field. Foreign Investors having many years experience in the same field in its mother country shall be favored. With the reference to MLM, Client need to show a good profile representing long history of operation, big market, good fame, good products and good income.
- Quality of Products: Client must prepare detail explanation on the products to be distributed in Vietnam. Origin, Trademark, Ingredient, Health Effect, Usage and targeted customers of the Products must be clearly explained and it must be equipped with relevant Certificates.
- Financial Ability: For setting up MLM Company, Client needs to invest at least 500,000USD upward. Higher of 250,000USD or 5% of charter capital of FIC must be deposited in a blocked bank account opened in a Bank duly established and operating in Vietnam. Furthermore, Client must show a good, stable financial ability through its financial statements in at least recent 03 years.
- Office’s address of FIC: The registered head office address of the FIC must be compliant with master plan of the City or Province wherein it registers the head office address. We would like to note that total area of the Head Office must be sufficient for conducting MLM Sale Activities.
II. Obtainment of Sub-License for Multi Level Marketing Sale
Upon completion of obtainment of IC, the FIC must further carry out with necessary procedure concerning the product quality declaration for imported functional foods. Upon completion of such procedure, the FIC shall follow the licensing process 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.
Having consulted Vietnam Association of Multi Level Marketing Sale, we were noted that one of very important factor to obtain the Sub-License for Multi Level Marketing Sale is the operation and bonus payment rule. Accordingly, Multi Level Marketing Binary Pay Rules shall be no longer favored.
