Executive Bylaw
Executive Bylaw on the Manner of Issuing and Renewing Business Licenses and the Method of Supervising Guild Members in Cyberspace
Notice to all operators and companies holding a network marketing license;
The Executive Bylaw on the Manner of Issuing and Renewing Business Licenses and the Method of Supervising Guild Members in Cyberspace (the subject of the Note to Article (87) of the Guild System Law)
comprising 25 Articles and 19 Notes, prepared by the Iran Chamber of Guilds in cooperation with the Secretariat of the Supreme Supervisory Board and the Ministries of Communications and Information Technology, was approved on 1396/01/28 by the esteemed Minister of Industry, Mining and Trade, and replaces the previous bylaw.
Article 1-Definitions:
1- Virtual Business: A guild unit established by any natural or legal person for offering a product (goods or services), directly or indirectly, in whole or in part, to wholesalers, retailers, and consumers through remote communication tools such as websites and commercial software (applications).
2- Network Marketing: A method of selling a product whereby a network marketing company, through its website, organizes individuals as marketers, without a fixed place of business, for the direct sale of its products to the consumer, in such a manner that each marketer, by introducing another marketer as part of his/her downline, may, by forming a multi-level sales group, bring about the expansion and increase of sales.
3- Network Marketing Company: A legal person that sells the products it manufactures itself, or those of its parent company (holding more than 50 percent of the shares and capital), by the method of network marketing.
4- Marketer: A person who, outside the network marketing company, under a mutual contract, through the direct sale of products to the consumer, or by supporting and training the marketers of his/her downline for the purpose of expanding and increasing the company's sales, receives specified amounts under the profit plan.
5- Profit Plan: The company's program for calculating and paying a percentage of product sales, in exchange for personal sales and for recruiting, training, managing, and leading a sales group, as the marketer's profit, commission, or bonus.
6- Consumer: Any person who, in exchange for payment, purchases a product for a non-commercial purpose and solely for his/her own use.
7– Consumer Products: Goods and services offered in network marketing that are within the consumption basket of a wide segment of society, are repurchased several times a year by consumers, and have similar counterparts in the market.
8- Union: The national union formed from the guild units subject to this Bylaw, pursuant to Note (7) of Article (21) of the Guild System Law.
9– Supervisory Committee: The Supervisory Committee referred to in Article (15) of this Bylaw.
10- Electronic Trust Symbol: A mark granted by the Electronic Commerce Development Center, in accordance with the regulations, to virtual businesses for the purpose of organizing them and verifying their identity and qualifications, simultaneously with the issuance of the business license.
11- Network Marketing Symbol: A business-license mark granted by the Iran Guilds and Traders Center, in accordance with the regulations, to the websites of network marketing companies for the purpose of organizing them and verifying their identity and qualifications, simultaneously with the issuance of the business license.
12- Guilds System: The electronic system for issuing guild business licenses (at: iranianasnaf.ir)
13- Enamad System: The electronic system for granting the electronic symbol (at:enamad.ir)
Part One: Virtual Business
Article 2- The Secretariat of the Supreme Supervisory Board and the Electronic Commerce Development Center are required, while connecting their systems, without the need to obtain the documents again (in accordance with Article (3) of this Bylaw), to provide the parties with access to the applicant's documents and the simultaneous issuance of the business license and the electronic trust symbol.
Article 3- Steps for Issuing a Business License:
1- Setting up the virtual business by the applicant in accordance with the checklists of the Electronic Commerce Development Center.
2- Registration of the application by the applicant on the Enamad system (referral of the application for a business subject to the Guild System Law by the Electronic Commerce Development Center, immediately after evaluation and based on the list of the Iran Guilds and Traders Center, to the Guilds System).
3- Uploading the documents set out in Article (4) of this Bylaw by the applicant to the Guilds System within a maximum of three months after acceptance of the application.
4- Completion of the file in accordance with Article (4) of this Bylaw by the Union.
Note- The Union is required to simultaneously make inquiries of the counterpart agencies referred to in Article (4) of this Bylaw.
5- Issuance and delivery of the business license (after matching the uploaded documents with the originals) to the applicant within a maximum of fifteen days, and sending the business license particulars to the Enamad system.
6- Granting of the electronic trust symbol simultaneously with the issuance of the business license.
Article 4- Documents Required for Issuing a Business License:
a)– General:
1- Providing the address of the applicant's office or legal domicile.
2- Certificate of personal qualification from the Police Force.
3- Certificate from the relevant Tax Affairs Office confirming payment, or arrangement for payment, of any finalized tax debt (subject of Article (186) of the Direct Taxation Act).
4- Certificate of completion of training courses on commercial and business regulations (subject of Clause (n) of Article (30) of the Guild System Law).
5- Confirmation of the technical characteristics of the virtual business by the Electronic Commerce Development Center, based on the Electronic Commerce Law and Article (3) of the Charter of the Electronic Commerce Development Center.
Note- Holders of a business license in the physical realm who also apply to sell the products of their guild unit through cyberspace shall, in order to obtain a virtual business license and the Enamad symbol, be required only to provide this confirmation.
6- Copy of the national ID card for natural persons and the national identifier for legal persons, or the passport and work permit for foreign nationals.
7- Copy of the military service completion card, permanent exemption, or medical exemption for men under fifty years of age, or a certificate of enrollment in education.
b)– Specific:
1- A specialized and technical license, a technical diploma, or relevant university degrees, or the introduction of one qualified person meeting the foregoing conditions (for guilds subject to the Note to Article (13) of the Guild System Law).
2- A resolution of the Board of Directors for issuing the business license in the name of the managing director or one of the authorized signatories, in accordance with the articles of association and the latest official gazette notice of the company's registration (for legal persons).
Article 5- Categories of Violations and the Manner of Dealing with Offenders:
The penalties in clauses (a) and (b) of this Article shall be applied by the Supervisory Committee in the event of the commission of any of the violations set out thereunder.
a)- Written Warning:
1- Failure to provide information that would affect the consumer's decision to purchase or to accept the terms.
2- Failure to observe the consumer's right of withdrawal.
3- Failure to use a durable medium for storing information related to transactions.
4- Imposing unfair terms on the consumer.
5- False advertising.
6- Failure to deliver goods or provide services on time.
7- Failure to respond to consumer dissatisfaction (within a maximum of three working days).
8- Failure to state or announce the manner of supplying the goods.
9- Failure to observe the guild law and regulations and the Supervisory Committee's resolutions.
Note- After the warning is communicated, the holder of the virtual business license is required to correct his/her conduct within ten days. If not corrected, his/her activity shall be suspended pursuant to clause (b) of this Article.
b)- Suspension of Activity and Symbol:
1- Failure to supply goods or provide services (subject to Article (39) of the Electronic Commerce Law).
2- Breach of consumer data protection.
3- Offering unauthorized goods.
4- Repetition or multiplicity of the violations set out in clause (a) exceeding (3) instances within one year.
Note 1- During suspension, the holder of the business license shall not have the right to create new obligations; if, after one month of the suspension period, the holder of the business license corrects his/her conduct and brings it into compliance with the regulations, the suspension shall be terminated.
Note 2- In the event of repetition or multiplicity of the violations under this clause, the minimum period of suspension of activity shall be three months; the suspension shall be terminated once conduct has been corrected and the said period has elapsed.
Article 6- Any change in the virtual business process is permitted only in compliance with the provisions of this Bylaw.
Part Two: Network Marketing
Article 7- Steps for Issuing a Business License:
1- Registration of the application by the applicant on the Guilds System.
2- Review, by the Police Force, of the personal qualifications (members of the Board of Directors, major shareholders, and the proposed managing director), and of the company office's law-and-order and traffic status, with a response provided within a maximum of fifteen days.
3- Review of the profit plan by the Secretariat of the Supervisory Committee (within a maximum of fifteen days).
4- Registration of the company as a private joint-stock company with network marketing as its object, with an introduction letter from the Secretariat of the Supervisory Committee.
Note- The applicant is required, within a maximum of three months from the date of the said introduction letter, to register its company with the company registration authority and to upload the official gazette notice to the Guilds System; otherwise, the applicant shall be treated as a new applicant.
5- Setting up a website by the applicant in accordance with the Supervisory Committee's checklist.
6 - Issuance and delivery of the business license (after completing the file and matching the uploaded documents with the originals) to the applicant within a maximum of fifteen days by the Union.
7 - Granting of the network marketing symbol simultaneously with the issuance of the business license.
Article 8- Documents Required for Issuing a Business License:
1- Title deed or lease agreement for the company office.
2- Confirmation of the profit plan by the Secretariat of the Supervisory Committee.
3- A resolution of the Board of Directors for issuing the business license in the name of the managing director or one of the authorized signatories, in accordance with the articles of association and the official gazette notice of the company's registration with the latest amendments.
4- Certificate of personal qualification (of the members of the Board of Directors and the proposed managing director), and of the company office's law-and-order and traffic status, through the Police Force.
5- Meeting the conditions and documents set out in items (3), (4), (6), and (7) of row (a) of Article (4) of this Bylaw.
6- Having a manufacturing unit in the name of the company and providing its operating license.
Note- The business license of the network marketing company shall be issued, upon submission of the above documents, in the name of the company, stating the name of the managing director or one of the authorized signatories, to the address of the office and the website address of the company.
Article 9- The following matters must be observed in the profit plan:
1– Collecting any sum of money or consideration whatsoever for entry into the network marketing company is prohibited.
2- A minimum monthly purchase amount shall be set for the marketer to qualify for receiving commission and bonuses.
3- The payment of any commission or bonus must be based on the sale of the company's product and not on the recruitment of marketers, and any payment arising from the sale of the company's ancillary tools, including sample sale goods, sales tools, advertising, and training, is prohibited.
4- The payment of commission and bonuses shall, having regard to the marketers' job descriptions, be limited to (3) levels. (The payment levels may be adjusted with the approval of the Ministry of Industry, Mining and Trade).
5- The aggregation of the marketer's and the sales group's sales volume must be calculated monthly (within a maximum of seven days after the end of each month).
6- The payment of marketers' commission or bonus must be in cash and not in the form of the company's products.
Article 10- The network marketing company is required to observe the following criteria:
1- Sale of consumer products in accordance with the submitted list and in compliance with the criteria and the customary market sale price.
Note- The company is required to obtain, in accordance with the regulations, the price and the necessary licenses for its products, including the health permit and standard certification, and in any event, the product price must not exceed the customary market price.
2- Concluding contracts with marketers through the company's website, and also issuing and providing a photo identification card bearing the company's seal, containing the first and last name, father's name, national ID number, network marketing unique code, marketer identifier, and the company's name.
Note- Connection of the network marketing company's website to the system of the Ministry of Industry, Mining and Trade
(at:unicode.mimt.gov.ir) is mandatory for monitoring the company's database.
3- Not recruiting marketers from among persons under eighteen years of age.
4- Prohibition on employing, as marketers, the staff of the network marketing company and of the agencies and institutions responsible for supervising network marketing companies.
5- Holding all marketer meetings at the company's office or branches.
6- Free provision of a training course covering the process and concepts of network marketing and the company's code of ethics, with the participation of higher-level marketers, for other marketers, and submission of the training course content to the Secretariat of the Supervisory Committee for compliance review.
7- Avoidance of any deception or false advertising for the purpose of recruiting marketers or in relation to the company's products.
8- Direct sale of products to the marketer and prohibition of sale from one marketer to another marketer.
9- Not encouraging marketers to purchase products beyond their capacity to sell or for personal consumption.
10- Making all payments to marketers in the form of commission and bonus, in accordance with the profit plan.
11- The monthly sales volume of products to marketers required to qualify for commission and bonus must be adjustable in the event goods accumulate as inventory with the marketer.
12- Payment of marketers' commission solely on the basis of product sales and in exchange for the collective participation of higher levels in recruiting and training new marketers, not for enrollment itself.
13- Carrying out all financial transactions (such as purchase, sale, and payment of commission and bonus) through the country's banking system, in the name of the company.
14- Providing the marketer, on a monthly basis, with all information relating to his/her operations, such as the amount of personal sales and group sales.
Note-The company is required to document all information relating to marketers' operations and payment records in accordance with the regulations.
15- Creating a portal for handling complaints and dissatisfaction, capable of being recorded in the company's databases, and providing a tracking code and responding to complaints (within a maximum of ten days).
16- Taking back sold products that are resalable, in accordance with the terms of the mutual contract between the company and the marketer.
Article 11- The company may establish a branch with the company registration authority, in which case it is required, for establishing branches, to submit to the Secretariat of the Supervisory Committee the necessary documents, including: the title deed or lease agreement, and the certificate of personal qualification of the branch manager (a person who is not a marketer) and the branch's law-and-order and traffic status.
Article 12- The network marketing company is required, in the event of dissolution under the Commercial Code, to act in such a manner as to fulfill its obligations in respect of products purchased by marketers and consumers, and to surrender its business license to the Union for cancellation within a maximum of fifteen days after the dissolution is announced.
Note 1- In the event the business license is cancelled, the company is required, in observance of the legal formalities, as applicable, to proceed with the dissolution of the company or the change of the company's object of activity.
Note 2- In the event the company announces suspension of payments, the business license shall be suspended, and in the event a bankruptcy ruling is issued, the business license shall be cancelled.
Article 13- Categories of Violations and the Manner of Dealing with Offenders:
The penalties in clauses (a), (b), and (c) of this Article shall be adopted by the Supervisory Committee in the event of the commission of any of the violations set out thereunder.
a)- Written Warning:
1- Failure to pay commission on a monthly basis.
2- Encouraging the purchase of products beyond the capacity to sell or for personal consumption.
3- Setting a specific purchase volume from the product basket (sales strategy).
4- Failure to hold free training for marketers.
5- Recruiting marketers from among persons under eighteen years of age.
6- Failure to conclude a contract between the company and marketers.
7- Failure to issue photo identification cards for marketers.
8- Paying commission and bonus from the company's products.
9- Failure to observe the obligations under the contract, including delay in shipping and taking back goods.
10- Failure to post the regulations relating to network marketing and the profit plan on the company's system.
11- Changing the provisions of the articles of association without coordination with the Secretariat of the Supervisory Committee.
12- Failure to observe the guild law and regulations and the Supervisory Committee's decisions.
13- Holding meetings outside the branch premises.
14- False advertising regarding products and the profit plan.
15- Establishing unauthorized branches.
Note 1- In the event of the commission of the above violations, in addition to the warning, restrictions such as a ban on setting up branches and offering new products shall, at the discretion of the Supervisory Committee, be applied until the company's conduct is corrected and brought into compliance with the regulations.
Note 2- After the warning is communicated, the company is required to correct its conduct within twenty days. Otherwise, its activity shall be suspended and the symbol's color changed to yellow.
b)- Suspension and Change of the Symbol's Color to Yellow:
1- Collecting any sum of money or consideration whatsoever for entry into the network marketing company.
2- Conducting the company's financial operations and payments outside the banking system.
3- Changing the profit plan without obtaining authorization.
4- Selling products outside the Committee Secretariat's list, or offering products lacking the necessary licenses, such as the health permit and standard certification, as applicable.
5- Repetition or multiplicity of the violations set out in clause (a) for a third time within one fiscal year.
6- Committing a violation under the Notes to clause (a).
Note: The suspension period shall be three months; if, after one month of the suspension period, the company corrects its conduct and brings it into compliance with the regulations, the suspension shall be terminated.
c)- Cancellation of the Business License and Change of the Symbol's Color to Red:
1- Failure to correct conduct during the suspension period.
2- Repetition or multiplicity of the violations set out in clause (b) within one fiscal year.
3- Dissolution of the company.
4- The company's inactivity for a period of at least six months.
5- Failure to renew the business license after the expiry of its validity period, following a one-month warning from the Union.
Article 14- A guild member may submit his/her objection to the closure of the guild unit, within fifteen days after notification, to the Secretariat of the Supreme Supervisory Board. The Secretariat is required to review the complainant's complaint within fifteen days in accordance with the regulations.
Part Three: Method of Supervision and Handling of Violations
Article 15- For the purpose of supervising the performance of network marketing companies and virtual businesses in terms of compliance with the guild system law and regulations, a committee shall, as applicable, be formed consisting of representatives of the Iran Guilds and Traders Center (as chair), the Electronic Commerce Development Center, the Ministry of Intelligence, the Ministry of Communications and Information Technology, the Police Force, the Iran Chamber of Guilds, and the relevant guild union (each within the scope of its own authority and duties), with the following duties. The said Committee has a Secretariat, based at the Iran Guilds and Traders Center, which is responsible for coordinating and carrying out its executive affairs.
Article 16- The duties and powers of the Supervisory Committee are as follows:
1- Preparing standard forms (including the marketers' contract and the network marketing company's articles of association).
2- Determining the list of consumer product groups.
3- Issuing an opinion regarding the profit plan of network marketing companies, based on referral from the Secretariat of the Supervisory Committee.
4- Determining and applying the criteria for ranking network marketing companies.
5- Directing, coordinating, and guiding the corresponding provincial levels of the Committee for the purpose of supervising the performance of virtual businesses and the offices and branches of network marketing companies.
6- Handling violations by virtual businesses and network marketing companies, and, as applicable, reporting violations to the relevant authorities.
Note 1- The aforesaid handling shall not preclude the Electronic Commerce Development Center from exercising supervision over virtual businesses in accordance with the relevant regulations.
Note 2- The network marketing company must, upon notification from the Committee's Secretariat, apply the necessary restriction to the offending marketer; in any event, the marketer's violation shall be taken into account in evaluating the company's performance.
Note 3- In the event the company violates the provisions of this Bylaw, at the discretion of the Supervisory Committee, the Police Force shall seal the offending company's office or branch.
Article 17- Steps for Handling Violations:
a- Notification of the violations to the holder of the business license, based on reports and complaints received.
b- Obtaining a defense (the holder of the business license may, within fifteen days from the date of notification, submit his/her documented defense).
c- Holding a review meeting within a maximum of fifteen days after receiving the defense and completing the file.
Note- The attendance of interested parties at the review meeting, if requested by them, is not precluded.
Article 18- The provisions of this Bylaw relating to virtual businesses shall be binding to the extent that a network marketing company engages in selling goods or providing services in cyberspace.
Article 19 –In the event of widespread violations, in order to prevent their possible consequences, the Supervisory Committee may, while suspending the activity of the guild unit subject to this Bylaw (for up to six months), simultaneously proceed to handle the matter.
Part Four: Other Provisions
Article 20- All agencies subject to inquiry under this Bylaw are required to state their final and conclusive opinion within a maximum of fifteen days from the date of receiving the inquiry. A favorable opinion must be unambiguous and unconditional, and an unfavorable opinion must state the reasons and be based on legal grounds. Otherwise, or in the event an opinion is not stated within the prescribed period, it shall be deemed a positive opinion, and a negative response from the agency queried, given after the prescribed deadline, shall not prevent the issuance of the business license.
Article 21- Handling Complaints of Business License Applicants:
1- If the Union rejects the application of a business license applicant or objects to the issuance of the business license, it must, within a maximum of fifteen days, notify the applicant of the matter, stating documented reasons, and, in the case of a virtual business, through the Enamad system.
2- If the applicant objects thereto, he/she may, within twenty days from the date of receiving the response, submit his/her objection to the Iran Chamber of Guilds.
3- The Iran Chamber of Guilds is required, either directly or through the Chamber of Guilds of the city where the guild member's office or domicile is located, to review the applicant's objection within fifteen days.
4- If the Union or the applicant objects to the opinion of the Iran Chamber of Guilds, they may, within twenty days from the date of notification, refer their objection to the Secretariat of the Supreme Supervisory Board. The Secretariat of the Supreme Supervisory Board is required to review the matter within fifteen days, in accordance with the regulations, and announce the result.
Article 22- Conditions for Renewing the License of a Virtual Business and a Network Marketing Company:
1- Certificate from the relevant Tax Affairs Office confirming payment, or arrangement for payment, of any finalized tax debt (subject of Article (186) of the Direct Taxation Act).
2- Copy of the official gazette notice of the Islamic Republic of Iran, in the event any type of change is registered in the company (for legal persons).
Certificate of completion of training courses on commercial and business regulations (subject of Clause (n) of Article (30) of the Guild System Law).
Article 23- In the event the electronic trust symbol is revoked or the business license is cancelled, the validity of both shall lapse.
Article 24- Network marketing companies established under the previous regulations are required, within six months from the date this Bylaw takes effect, to bring their status into conformity with its provisions.
Article 25- This Bylaw, issued in implementation of Articles (2) and (12) and the Note to Article (87) of the Guild System Law, comprising (25) Articles and (19) Notes, was prepared by the Iran Chamber of Guilds in cooperation with the Secretariat of the Supreme Supervisory Board, the Ministry of Intelligence, and the Ministry of Communications and Information Technology, approved at the 112th and 113th sessions of the Supreme Supervisory Board, and approved on 1396/01/28 by the Minister of Industry, Mining and Trade, and replaces the previous bylaw.