On May 14th  2014 the Government has issued the Decree No. 42/2014/ND-CP  (“Decree 42”) on multi-level marketing management, replacing the Decree No.  110/2005/ND-CP. 

Overall, the new Decree has promulgated stricter provisions in a move to better  manage such business model. Three most outstanding points noticed from this  Decree are about (1) conditions for multi-level marketing registration, (2)  duration of Multi-level marketing registration Certificate and (3) management  and supervisory body. 

Accordingly, regarding multi-level marketing registration, the Decree 42  stipulated that enterprises wishing to register multi-level marketing business are  required to have a legal capital of VND 10 billion. In addition, multi-level  marketing enterprises shall be required to deposit an escrow of equivalent to  5% of charter capital but not less than VND 5 billion, instead of VND 1 billion  as previously, in a commercial bank where lies its head office, and be entitled  to interest on the escrow under agreement with bank. The escrow account shall  be blocked during the enterprise’s operation and shall only be withdrawn for  use by a written acceptance of the issuing body of the Multi-level marketing  registration Certificate, or when being refused to issue the Multi-level marketing registration Certificate. However, the Decree is not clear on whether  the escrow is considered as a part of legal capital of the enterprise.

Besides, the Decree also supplemented regulations with respect to the duration  of Multi-level marketing registration Certificate. Accordingly, Multi-level  marketing registration Certificate shall be valid for 5 years, then possibly  extended repeatedly for another 5 years at a time. Such certificate can be  revoked in case the enterprises do not operate their multi-level marketing  business within 12 consecutive months from the date of issuance, or  discontinue the operation of multi-level marketing sale for 12 consecutive  months or being dissolved, bankrupt, etc. 

With regard to the management and supervisory body, the Ministry of Industry  and Trade shall take responsibility before the Government for performance of  the state management of multilevel marketing activities, including the right to  issue Multi-level marketing registration Certificate, instead of municipal and  provincial Departments of Industry and Trade as previously. 

The Decree will come into effect from 1 st  July 2014.