Danish production company Zentropa is to cut a quarter of its staff; while local authorities investigate a number of its subsidiary companies.
Peter Aalbæk Jensen and Lars von Trier's Zentropa is set to lose 20 out of a total of 80 of its staff in the weeks to come.
At the same time, the Danish Commerce and Companies Agency, an agency under The Danish Ministry of Trade and Industry responsible for the administration of the law on companies, accounts and business law, has launched an investigation into the financial situation of several Zentropa companies.
Seventeen out of 50 Zentropa subsidiaries reported negative net capital at the end of 2002 - and are now on the verge of compulsory dissolution.
Their future depends on whether Zentropa's owners, Jensen and von Trier, are able to provide the minimum capital requirement, or whether they liquidate the companies.
"We have had a very busy year in 2002, but the level of activity will not be as high in 2003. This is why we are currently discussing with our department directors, where it is most functional to cut employees, Zentropa's chief financial officer Peter Garde told Danish newspaper Borsen.
Last year, Zentropa signed contracts for the production of multi-episode TV series for Danish commercial TV channel TV 2, and for state-owned TV and radio broadcaster Danmarks Radio. However, both projects failed.
In addition, during 2002 Zentropa produced six feature films, double the company's usual production level, further affecting its balance sheets
Local Danish media reports that Jensen will announce the lay-offs when he returns from Sundance.
Two Zentropa films have been selected for the Berlin film festival - but both Lone Scherfig's Wilbur Wants To Kill Himself and Thomas Vinterberg's It's All About Love are to be screened out of competition.
At the end of December, Zentropa's internet outfit Tvropa filed for insolvency after the company lost hundreds of thousands of dollars.