All 40 of the agency's staff were made redundant on Tuesday. So far no financial arrangement has been reached between MDC and employees.
Mr Smith, previously the below-the-line agency Interfocus, was the brainchild of the managing director, Stuart Leach, and the creative director, Ian Thomas.
Although Leach and his management team are said to be hopeful of saving the business, Thomas is no longer with the agency, according to an insider. Its clients include Lloyds, Panasonic and Epson.
Leach, the former head of strategy, took over from the chief executive, Chris Zandonati, who left as part of a management overhaul instigated by MDC's chief strategy officer, Chuck Porter.
The rebranding of Interfocus was seen as the first step in a planned UK expansion being led by Porter.
