Playlogic files for bankruptcy

It's no bankruptcy yet. It's a few steps before actually going bust.

From the SEC
ITEM INFORMATION: Bankruptcy or Receivership

Playlogic Entertainment, Inc. (Nasdaq OTC: PLGC.OB), an independent worldwide publisher of entertainment software has announced today that it is has voluntary requested a delay of payments, ‘surseance van betaling’, the Dutch equivalent of Chapter 11, for its subsidiary Playlogic International N.V and her wholly owned subsidiary Playlogic Game Factory B.V.

American law has no real equivalent for the Dutch 'surseance van betaling'. Surseance van betaling means that a judge orders all the creditors to 'back of' and give the company some space to sort out their financial business under the supervision of the court. After some time the company will propose to all creditors an agreement in which they can, for instance, propose to pay off debts in installments or to pay just a certain percentage of the debts. When the creditors agree to this proposition it is business as usual and the company will not go bankrupt. Only when the proposition is turned down by the creditors the company will be declared bankrupt. So in the case of Playlogic it is not sure yet. This may sound silly, because why would any creditor agree to receive just a percentage of their outstanding invoices. The answer is simple: if they don't accept the proposal and the company will be declared bankrupt they will most probably get absolutely nothing.

For the SEC filing Playlogic used the word 'Chapter 11', since it is the closest equivalent in US law to 'surseance van betaling'. When you file for Chapter 11, in most instances the debtor remains in control of its business operations as a debtor in possession, and is subject to the oversight and jurisdiction of the court. Just like in the case of 'surseance van betaling'. As with other forms of bankruptcy, petitions filed under Chapter 11 invoke the automatic stay of § 362. The automatic stay requires all creditors to cease collection attempts. This is also similar to surseance van betaling'. And in the case of Chapter 11 a company can reorganize and continue to exist. Whereas under Chapter 7 a company will be liquidated and cease to exist. Chapter 7 would be the closest equivalent to a Dutch bankruptcy.

So even though I have to admit that it doesn't look good, Matthijs is right. Playlogic is not declared bankrupt yet under Dutch law. And Dutch law is applicable in this case since both the Playlogic International NV and Playlogic Game Factory BV are Dutch entities.