Dealing with debt and winding up a business in China can trap the unwary, writes John Church

It’s not a desirable scenario. A foreign company owes money to angry creditors, losses cannot be retrieved, business partnerships have soured, things are not as they should be. Time to wind things up and leave. But when and how you do so, and indeed if you can, are all factors that need to be carefully weighed up in any China exit strategy.

For foreign businesses operating in China, due diligence is often an afterthought that can cost them dearly.

Take the example of one US businessman, whose story was widely reported earlier this year. Steve Fleischli was forced to surrender his passport and not allowed to leave China because of his company’s unpaid debt to local firms. Fleischli was head of the company and also apparently its legal representative in China. He was subsequently relieved of his position with the company.

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