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When is the best time to add to our stories under outer sector ficition. I think I left my readers off thinking demon company died in the crash

I believe you've got the whole of the campaign to contribute each chapter(which only has to relate to the associated chapter's theme or objective). If you're assigned fiction, obviously, you have only the two weeks that chapter lasts in which to complete it.

Again, rather obviously, you can't write another chapter until its details have been released in Outer Sectors II's official announcements.

with the new chapter out, can people add that prisoners are taken and defection is thought about or is that not allowed?

It will make a good chapter three when several members of the military are taken prisoner and those that "defected" find out during patrol that the republic has captured such and such people.

I think that the best thing you can do, is do what you want. But don't "interfer" with the OS-II main story (from AD Fel).

As exemple: Make a story about Captain Fel sitting on a toilet bowl reading his next mission assignment on his datapad if you like. But don't make a story about him dying (obviously) while he is reading his next mission assignment while taking a cra.... :p

Yay Elvis Presley style death.