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MLM legal Services

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MLM Legal Services

Who can start MLM Business?

A company or manufacturer or a trading company that markets exclusive products or services on the market and wants to benefit customers around the world without creating costly boutiques and showrooms can begin to sell their products or services through Direct Selling or use MLM Marketing to increase their sale.
What is MLM?
MLM (Multilevel Marketing Company) is a marketing promotion strategy in which a vendor sells products or services to individual MLM companies and recruits new promoters in its downstream business for future sales of products and services.
It is a marketing system in which a hierarchical model is followed, in which sales promoters are organized according to a pyramid structure. The goal of the seller is not just to sell the product, but also to attract more people to pursue the product sales chain, and the chain continues over and over again. Here, the benefits of the initial seller increase continuously with the growth of the chain. This is also known as multilevel marketing, network marketing, matrix marketing, etc.
To create a new MLM company, you must register it according to the specific law of your country, the guidelines of the law and also consult the secretary of the company to obtain certification and other formalities. Choose the products or services you want to sell and choose the best MLM compensation plan based on your business strategy.
According to this law, the money circulation system refers to any system, regardless of name, which makes it possible to earn money quickly or easily, or to receive money or something valuable such as the counterpart of money. a promise of relative or relative contingency or applicable to the registration of members in the plan, whether or not the money or thing is derived from the members' entry money or periodic subscriptions.
At, Softwin Infotech, we provide a professional guidance and help you to carry out your various legal activities and formalities, which is required to start your MLM Business legally.
Here are few Government Rules for MLM Companies in India
To regulate the sale of goods and services outside of retail establishments, also known as "direct sale (multilevel marketing)" and to protect consumers who purchase goods and services from direct sellers, the following guidelines are issued with the approval of the Authority.

These guidelines will become effective as of the date of publication in the Official Gazette and will remain so until the appropriate legislation is enacted for this purpose:

1. Definitions

  • Direct sales: means the marketing or direct sale of products to the final consumer through word of mouth advertising, presentations and / or demonstrations of products / products and / or the distribution of brochures. Explanation: Businesses can open collection points and delivery points to maintain an efficient delivery system.
  • Direct seller: means a person authorized by the direct sales entity to participate in the direct sales activity.
  • Goods / Products: Goods / Products by the same meaning as the Law of Sale of Goods and section 3 (26) of the Law of General Clauses of 1897 that is to say, they are Claims and money.
  • Direct Selling Entity: means a business entity recognized by law to date, including, but not limited to, a corporation duly incorporated under the Companies Act of India, a corporation registered in accordance with its corporate law. India.
  • Consumer: A person who buys goods or services for personal use and not for manufacturing or resale, and has the same meaning as in the Consumer Protection Act. 1986
  • Sales Incentive: Sales Incentive means the portion of the profit payable to the direct seller for the sale of goods / products, as stipulated in the contract between the direct seller and the direct selling entity.

2. Conditions for Permissible Direct Selling

  • It must be a direct sales entity with a sales / VAT tax, an income tax, a TDS license and any other license required by law / regulation. its main place of activity.
  • You must have a bank account with at least one nationalized bank.
  • The company deed or the constituting act must clearly indicate its commercial nature. (Those who do not have such specific clauses must obtain the memorandum of their association or their act of association, as the case may be, modified within 2 months from the date of publication of these guidelines)
  • Pay the sales premium at the agreed rate within the agreed time.
  • They will display the names and ID numbers of their authorized direct sellers on the official websites.
  • jThe website should provide a space for recording consumer complaints without problems.
  • You must have a consumer complaint unit to guarantee the repair of consumer complaints within 7 days of filing these claims.

3. Appointments/Authorizations

  • The direct selling entity will designate / authorize direct sellers once it has received and reviewed the application in a prescribed format.
  • A contract that records the terms of such designation must be signed between the direct selling entity and the direct seller.
  • No applications should be considered unless the applicant is eligible to sign a contract under the Indian Contracts Act.
  • Unique identification numbers will be assigned to each direct seller prior to the granting of the license / permit for direct sale.
  • The direct selling entity should not encourage a person to join the direct sellers.

4. Prohibition

  • The text of the invitation for the management of the information is related to the volume of sales.
  • Supply / distribution of goods knowing that the goods / products are below or beyond their validity period according to the manufacturer.
  • Environment of direct circulation of the circulation system of the traffic agents of 1978 on the interdiction of circulation and public transport.

5. General Conditions

  • The MRP of the goods must be visible in the package.
  • Accounts for individual direct sellers must be properly managed and available on the Web.
  • The sales incentive must be distributed to the respective seller by the agreed expiry dates.
  • IV The products sold by the direct selling entity must have the manufacturer's warranty. However, the consumer must have the opportunity to change / return the goods if he discovers a manufacturing defect or if the product purchased is not useful for the purposes for which it was designed,.

6. Information Readiness (Ready Information file)

  • Each direct selling company must keep a file containing all relevant documents, including:
  • Certificate issued by the Registrar of Companies, MOA and MOM.
  • Xerox copies of TIN, DIN Directors, TAN, PAN.
  • Sales tax certificate, service tax, CST records.
  • Copies of all sales tax returns filed with the authorities.
  • Copies of service tax refunds submitted to the authorities.
  • Copies of the company's computer reports filed with the authorities.
  • TDS Declarations of the respective distributors and payers.
  • Each direct selling company must maintain KYC / KYDS (Know Your Customer / Know Your Direct Sellers) as a mandatory process.
  • Specific formats must be provided on their websites so that they are accessible to everyone at all times.

7. Grievance Mechanism

  • Each direct selling company must have a claims repair mechanism to solve the problems of its direct customers / sellers.

8. Breach of Guidelines

  • Sales activities that do not comply with the above guidelines will not be considered direct sales and will be treated appropriately in accordance with the relevant provisions of the laws in force.