• Multi Level Marketing

Dear Sir I want to start an MLM company in which the joined members are going to advertise the products through the Social Media platform and will get Commission after ther products get sold through the respective Social Media website. ..
Is there any Rule in which my Concept does fits...
Need help... Please reply...
Asked 3 months ago in Business Law from Pune, Maharashtra
conditions for Permissible Direct Selling:-

1) Should be a Direct Selling Entity, having sales tax/Vat, Income Tax, TDS and other license as may be required as per the law/regulations of its principle place of business.
2) Should have bank account with at least one nationalised bank.
3) Partnership Deed or Memorandum of Association should clearly state their nature of business. (Those who do not have such specific clauses should get their memorandum of Association or Partnership Deed, as the case may be, amended within 2 months from the date of publication of these Guidelines).
4) Pay sales incentive at the agreed rate within the agreed period.
5)Shall display names and Identification numbers of their authorized Direct Sellers in the official websites.
6) Should have a consumer grievance cell that should ensure redressal of consumer grievances within 7 days from the date of making such complaints.
7) Website should provide space for registering consumer complaints hassle free.

Prohibition:-

Payment of incentive by whatever name it is called unrelated to their respective sales volume.
Supply/Distribution of goods with the knowledge that such goods/products are inferior or exceeded its validity period as per the manufacturer.
Direct Selling Entity/Direct Seller will not indulge in money circulation scheme or any act barred by the Prize Chits and Money Circulation Scheme (Banning) Act, I978.


General Conditions:-

MRP of the goods should be visibly displayed on the package.
Accounts of individual Direct Sellers shall be maintained properly and should be made available through World Wide Web.
Sales incentive should be distributed to the respective Seller on or before the agreed due dates.
Goods sold by the Direct Selling entity should carry guarantee/warranty of the manufacturer. However consumer should be given opportunity to exchange/return the goods if he finds any manufacturing defect or the product purchased is not useful for the purpose it was meant, within 30 days from the date of purchase, provided any seal/protection on the product is kept unbroken
Ajay Sethi
Advocate, Mumbai
23126 Answers
1215 Consultations
5.0 on 5.0
Hi
To ensure the consumer safety govt has codified certain rules under the act.

The general conditions you need to remember are...... 
MRP of the goods should be visibly displayed on the package.
Accounts of individual Direct Sellers shall be maintained properly and should be made available through World Wide Web.
Sales incentive should be distributed to the respective Seller on or before the agreed due dates.
Goods sold by the Direct Selling entity should carry guarantee/warranty of the manufacturer. However consumer should be given opportunity to exchange/return the goods if he finds any manufacturing defect or the product purchased is not useful for the purpose it was meant, within 30 days from the date of purchase, provided any seal/protection on the product is kept unbroken.

Mlm should maintain a file with all relevant documents that include:
Certificate issued by Registrar of Companies, MOA and MOM.
Xerox copies of TIN, DIN of Directors, TAN, PAN.
Certificate of Sales Tax, Service Tax, CST Registrations.
Copies of all Sales Tax Returns filed with the authorities.
Copies of Service Tax Returns filed with the authorities.
Copies of IT Returns of company filed with the authorities.
TDS Statements of Distributors and respective challans paid.
Every Direct Selling Company should maintain KYC/KYDS (Know Your Customer/Know Your Direct Sellers) as a mandatory process. Specific formats are to be provided on their websites to be available for all at any time.

Some of rules are Prescribed under rules are....

1.Mlm should be a Direct Selling Entity, having sales tax/Vat, Income Tax, TDS and other license as may be required as per the law/regulations of its principle place of business.
2.Should have bank account with at least one nationalised bank.
3.Partnership Deed or Memorandum of Association should clearly state their nature of business. (Those who do not have such specific clauses should get their memorandum of 4.Association or Partnership Deed, as the case may be, amended within 2 months from the date of publication of these Guidelines).
Pay sales incentive at the agreed rate within the agreed period.
5.Shall display names and Identification numbers of their authorized Direct Sellers in the official websites.
6.Should have a consumer grievance cell that should ensure redressal of consumer grievances within 7 days from the date of making such complaints.
7.Website should provide space for registering consumer complaints hassle free.
Under the rules following are prohibited...... 
Payment of incentive by whatever name it is called unrelated to their respective sales volume.
Supply/Distribution of goods with the knowledge that such goods/products are inferior or exceeded its validity period as per the manufacturer.
Direct Selling Entity/Direct Seller will not indulge in money circulation scheme or any act barred by the Prize Chits and Money Circulation Scheme (Banning) Act, I978.
Thresiamma G. Mathew
Advocate, Mumbai
1316 Answers
85 Consultations
5.0 on 5.0
You have to register your proposed MLM company with the concerned registrar of companies under the Companies Act and also you must register all the products with trademark registering authorities with brand names. Better to enter in to Memorandum of Understanding with the members and social media officials by inserting specific clauses.  There should be an arbitration clause and local jurisdictional courts must be mentioned.
Lakshmi Kanth
Advocate, Hyderabad
223 Answers
2 Consultations
4.8 on 5.0
For your concept sole proprietorship is the most ideal form of business. You may open a current account in the name of your business. You need to obtain licence under Shops & Establishments Act. Apart from this you need to obtain licences from respective departments depending upon the business you intend to do. A proprietory concern and proprietor are same in the eyes of law unlike other forms of companies. A sole proprietorship does not require mandatory registration. 
Ashish Davessar
Advocate, Jaipur
18061 Answers
446 Consultations
5.0 on 5.0

Ask a Lawyer

Get legal answers from top-rated lawyers in 1 hour. It's quick, easy, and anonymous!
Ask a Lawyer

Business Lawyers

T Kalaiselvan
Advocate, Vellore
13943 Answers
127 Consultations
5.0 on 5.0
Ajay Sethi
Advocate, Mumbai
23126 Answers
1215 Consultations
5.0 on 5.0
Ashish Davessar
Advocate, Jaipur
18061 Answers
446 Consultations
5.0 on 5.0
Krishna Kishore Ganguly
Advocate, Kolkata
12043 Answers
228 Consultations
5.0 on 5.0
Devajyoti Barman
Advocate, Kolkata
5164 Answers
54 Consultations
4.9 on 5.0
Nadeem Qureshi
Advocate, New Delhi
3522 Answers
129 Consultations
4.9 on 5.0
Rajgopalan Sripathi
Advocate, Hyderabad
868 Answers
43 Consultations
5.0 on 5.0
Shivendra Pratap Singh
Advocate, Lucknow
2728 Answers
41 Consultations
4.9 on 5.0
Lakshmi Kanth
Advocate, Hyderabad
223 Answers
2 Consultations
4.8 on 5.0
Shashidhar S. Sastry
Advocate, Bangalore
1233 Answers
59 Consultations
5.0 on 5.0