For Canadian Shop, Folding Is Hard to Do

In early November, Shorteno filed voluntary bankruptcy of Partenaires Grey, at which time the struggling agency claimed $1.37 million (U.S.) in liabilities, $940,000 in assets, and listed 178 creditors.
Though no one involved would comment for the record, apparently central to the firm’s demise is a disagreement over future severance payments to former Grey employees, a dispute that led Shorteno to start a motion to sue Grey for $860,000 just days before the bankruptcy declaration. At the time of the sale, according to a source familiar with the deal, Shorteno and Grey agreed that initially Grey would have liability for severance payments – which usually are much more generous in Canada than in the U.S. – if former Grey employees were dismissed. Partenaires would take on more of the burden as time went by.
Shorteno felt shortchanged, saying that the Grey employees had not lived up to a stipulation that they would help build the business. He explained in the creditors meeting: ‘I couldn’t see myself responsible for severances if these employees only worked on one or two former Grey accounts.’
Still, there are unanswered questions. As creditors prepare to vote on how to settle their debts, they are launching an investigation into why the shop fell so rapidly into bankruptcy.
Cathy Taylor is on staff in New York and covers Canada.
Copyright Adweek L.P. (1993)