Premiership club Worcester Warriors went into administration on Monday after being suspended by the Rugby Football Union (RFU) from all competitions after failing to meet a deadline to prove they could operate amid their financial difficulties.
Worcester are looking for new owners after they were served in August with a winding-up order over unpaid tax, reportedly totalling more than £6 million pounds ($6.41m).
The English club also owe the Department for Digital, Culture, Media & Sport (DCMS) £14m after taking out a long-term loan during the coronavirus pandemic but failing to secure new investment.
"In order to give the club the best possible chance of survival, and to protect a significant taxpayer investment, we have today agreed to the directors' request to place the club into administration," a DCMS spokesperson said.
"We will now apply to the court to appoint administrators and will begin work to explore all possible options to protect creditors and preserve the local rugby offering in Worcester."
RFU regulations state that a club placed in administration during the season will be relegated for the following campaign.
Worcester won the Premiership Rugby Cup last season but had to call upon former players to come out of retirement to help them in their title defence when they faced Gloucester in the group stage last week, losing 49-21.
"The owners of Worcester Warriors have not met the RFU's 5 p.m. deadline to evidence insurance cover, availability of funds to meet the monthly payroll, and a credible plan to take the club forward," the RFU said in a statement.
"The RFU has therefore suspended Worcester Warriors from all competitions, including the Gallagher Premiership, Allianz Premier 15s, U18s Academy Cup and Allianz Cup with immediate effect."
English rugby suffered heavy losses due to the COVID-19 pandemic that affected several clubs' revenue streams when games were held behind closed doors.
Last year the RFU said its revenue for the 2020-21 financial year was £120m lower than pre-COVID-19 forecasts, warning it would take "a number of years" to recover.
Worcester's co-owners said earlier this month that they had found three interested buyers and the deal was moving at a "rapid pace".
They met a deadline to provide assurances they could safely host games amid the financial turmoil before the RFU asked the club to come up with a credible plan to avoid suspension.
"We met with players and staff last week to explain why this action would be necessary and regrettably without assurances in place we have had to take this action to protect everyone's best interests," RFU CEO Bill Sweeney said.
"We hope a buyer can be secured to allow Worcester Warriors [...] to return to professional league rugby.
"While it is the responsibility of each business owner to manage their individual finances, we will look at learnings from this situation to see what regulation can be put in place to provide all parties with more financial transparency."
The RFU said it would work with Premiership Rugby and the DCMS to "establish next steps for the club" and what it means for the Premiership, men's academy and Premier 15s competitions.
Worcester have played three Premiership games this season, winning one, to sit 11th in the 13-team standings.
Last week, former Premiership and European champions Wasps filed a notice in the High Court stating their intention to appoint an administrator to secure their future, putting them on the brink of relegation.
Wasps were due to repay £35m in May from a bond scheme used to help finance their relocation from London to Coventry and purchase a lease on their stadium.
"Rugby is a relatively young professional sport and it has been widely recognised that clubs have been facing financial challenges even before COVID," Sweeney added.
"Successful professional leagues are vital for the wellbeing of the whole game... it is so important that we continue to work with Premiership Rugby to improve the structure, governance and business model of rugby union in England."