European publisher JoWood Entertainment applied for capital reorganization in the Vienna Commercial Court this week, as the company declared insolvency.
"The management board of JoWood Entertainment AG announces that all efforts towards restructuring of capitalization concerning outside capital as well as equity capital had to be considered as failed on [January 6, 2011]," JoWood said in a statement Friday. "On the basis of this fact, material insolvency occurred with this date."
Management still hopes to keep the company running, despite its current financial status. The board said it "assumes that negotiations with creditors and possible investors can be positively conducted and finalized within 90 days and thus continuation of the company can be assured."
Just days prior to the insolvency, JoWood filed a lawsuit against former game co-publishing partner Koch Media, demanding a payment of €2.36 million ($3.04 million), plus interest.
JoWood claimed that when it issued 6.4 million new shares valued at €6.4 million ($8.27 million) to Koch Media in a 2006 capital increase, those shares were overvalued. JoWood now contends that the new shares issued were only worth €4.04 million ($5.22 million), and that Koch now owes JoWood the difference, plus interest.
The publisher said management filed the lawsuit "in the company's and its shareholders' interest ... With a view to JoWood's strained financial situation and based on corporate law considerations."
JoWood said it believes its claim is "justified," but cautioned investors that a court decision will arrive "only after tedious proceedings that could last for several years."