Direct Selling Laws In India

The government has issued guidelines to regulate direct selling companies such as Glaze Trading India with clear provisions to protect consumers and forbid firms from exaggerating the benefits of products or charging a fee from their agents. Direct selling companies applauded the consumer affairs ministry for the guidelines, which industry executives said would weed out fraudulent players, help serious companies grow, protect consumers and disallow ecommerce platforms from offering their products without consent. The direct market companies should abide by the laws.

HOW TO INCORPORATE A DIRECT SELLING COMPANY IN INDIA [Foreign Co. Perspective ]

AS A FOREIGN COMPANY - An International Co. can do direct selling in India through followings: -

• Liaison Office/Representative Office
• Project Office
• Branch Office
• LIAISON OFFICE -

Expenses of such offices are to be met through inward remittances of foreign exchange from the Head Office abroad only.

Such offices should not undertake any trading or commercial activities, and their activities should be limited to collecting and transmitting information between the overseas Head Office and potential Indian customers.

Such offices should not charge any commission or receive other income from Indian customers for providing liaison services.

Through a CA such offices have to file an annual activity certificate to RBI.

The permission to hold such office is given for three years' subject to renewal.

PROJECT OFFICE: A Foreign Co. can set up a project office in India if they are planning to execute a specific project. RBI allow companies to set up offices but, any such offices cannot carry any activity except those which are related and incidental to the execution of said project.

BRANCH OFFICE: Its role will be broader in respect of liaison and branch office but will be limited: -

• To represent the parent company/ other foreign companies in various matters in India
• To conduct research work in the area in which the parent company is engaged
• To undertake export and import trading activities
• To promote possible technical and financial collaborations between the Indian companies and parent or overseas group companies.

The branch office is not allowed to carry on manufacturing activities. It has to submit annual activity certificate to RBI. For granting the approval, RBI considers the history of the applicant company.

AS AN INDIAN COMPANY - A foreign Co. can incorporate an Indian Co. as prescribed by the Indian Companies Act:

The foreign equity in such companies can be 100% depending on the requirements of the foreign investor and the FDI rules.

For registration, an application has to be filed with Registrar of Companies.

A foreign company can also do a joint venture with an existing Indian company and enjoy the established distribution channels of its partner.

The direct selling company must be a registered legal entity under the laws of India.

• The price of products
• Return or replacement of products
• Efficient delivery of goods and services
• Post-sale redressal of grievances
• Conditions for Conduct of Direct Selling Business

Every Direct Selling entity has to comply with the following conditions:

A well-updated website must be maintained, and it must have following information: -

A register named "Register of Direct Sellers" has to be maintained which will contain wherein relevant details of each enrolled Direct Seller i.e. verified proof of address, identity proof, and PAN. It must be updated time to time.

The Licensee of a trademark, service mark or any other identification mark related to the goods to be sold or supplied must be owned and held by it.

• Goods
• Services
• Terms of contract
• Price
• Income plan
• Details of direct seller
• Direct Sellers must have an identity card issued by the company.

A proper manual/electronic record must be maintained regarding business dealing, with complete details of

• All relevant details of the entity
• Contact information of its management
• Products and its information
• Product quality certificate
• Complete income plan
• Terms of contract with direct seller
• Complaint redressal mechanism for direct sellers and consumers.
• The grievances must be addressed within 45 days of making such complaints.

A direct selling company must monitor the value of the purchases of all its Direct Sellers on a monthly basis, and once the purchase value crosses the VAT threshold, it must intimate the Direct Seller to pay the VAT. The direct selling business model must be designed as per the laws.