Back in October, I suggested that maybe it was time for a Bankruptcy Court to be established in Second Life. At issue when I wrote that was the disposition of Investor Merlin assets following the collapse of Merlin Investment Bank. When I wrote this, I was not suggesting that I should be a judge in such a court, but since such a court does not exist, people have been turning to me for my comments on these sorts of issues. It is also worth noting that given the nature of Second Life, my comments do not have any enforcement mechanisms.

All of this leads me to my comments on the recent efforts of reviving SLC. Investor Merlin was one of the major investors in SLC. According to a release by VSTEX, he held 135,060 shares. Spontaneous Rich has been leading an effort to revive SLC. In the proposal, shares of SLC would be exchanged for shares of a company that is currently privately held, CCI. This company would then be listed on VSTEX. A sticking point in the discussion has become what happens to those 135,060 shares, as well as shares of other investors that are no longer listed in Second Life or have been idle for an extended period.

Today, I received a press release from Skip Oceanlane saying that VSTEX has released all of Investor Merlin’s assets to Skip. Samantha Goldflake confirms that Skip is now the legitimate holder of those stocks. As such, they are now held by a person that remains very active in Second Life. This means that Spontaneous Rich’s proposal will need to deal with these additional 135,060 which may dilute the value of the proposal a little, but shouldn’t derail the effort.

The bigger question that remains to be answered is, what happens to shares held by people no longer in Second Life? Spontaneous Rich claims that there are 11 such investors in SLC as well as an additional 8 investors that have not been active in a month. How should their assets be handled?

It would seem as if this is a general question that the VSTEX community as a whole should grapple with, and not simply the investors of a company that is being revived.

How long does a person have to be inactive before their shares are forfeit? My personal feeling is that it should be longer than thirty days. Linden Labs reports how many people have been active in the last 60 days, so that might be a better number. Yet I’m a little uncomfortable with even that. There have been times that I’ve been gone from other virtual worlds for more than 60 days, and yet returned.

The other question is, what should happen to the assets of a person that has been deemed truly to have departed Second Life, leaving no will? Should shares of their stock be returned to the company? Should they assigned to the stock exchange, and the exchange use them for its risk fund? Are there other ways they should be handled?

These are all issues that every exchange should be grappling with. They should be handled at the exchange level and not on the level of individual companies, especially during a restructuring.

It would seem as if the best option concerning the SLC restructuring would be for people to vote for Spontaneous Rich’s proposal. If he gets enough votes, VSTEX will need to decide how to implement the proposal. That should require opinions of all members about when assets become forfeit and how they are disposed of. If Spontaneous Rich agrees to the way VSTEX decides to handle defunct assets, then he should list his company there. If not, he might want to look at other exchanges that will handle defunct assets in other manners. Then, investors can determine if various exchanges handle defunct assets in a manner they are comfortable with.

I suspect that as we see more people invest in companies in Second Life and we see more people come and go, these sort of questions will become more common. To the extent that we can set wise precedents now, it will make things easier for everyone as the financial markets in Second Life evolve.