HMV has called in administrators from Deloitte, putting 4350 jobs and 238 stores at risk as it becomes the latest retail casualty on Britain's high street.
The 92-year-old music chain has seen its sales eroded by fierce competition from online retailers, digital downloads and supermarkets. It has also been saddled with £220 million ($A335 million) of bank debt.
HMV said talks to try to avert a breach of its banking covenants had been unsuccessful. Its shares were suspended with immediate effect. Administrators intend "to continue to trade while they seek a purchaser for the business", HMV said.
The company had been expected to issue a crucial Christmas trading update this week. Ian Kenyon, its chief financial officer, said Christmas trading had been "slightly behind expectations". He said the chain's suppliers had been "amazingly supportive" and were "working hard" to try to find a future for HMV.
Music and film suppliers, who want to see HMV survive as internet retailers erode their margins, have been crucial to keeping HMV afloat. It is understood they provided about £40 million of pre-Christmas support, but it is thought they were not prepared to offer the help needed to save it from administration.
Private equity firm Apollo Global Management had been seen as a possible buyer for HMV after buying some of its debt, but was said not to be planning a takeover.
HMV warned last month that its future was in "material uncertainty". Half-year sales had fallen 10.2 per cent and the group posted a loss of £36 million.
At the weekend it began a massive "Blue Cross" sale in an attempt to boost revenues, but it would appear that it failed to stem its haemorrhaging finances.
HMV raised cash last year by selling off book store Waterstones and the Hammersmith Apollo music venue in London. It has also shifted its emphasis from the CD and DVD market to new technology products.
The demise of HMV is the latest blow to the high street, which has seen other store collapses in recent months. HMV's chief executive, Trevor Moore, previously led British camera chain Jessops, which fell into administration last week.
The first HMV (His Master's Voice) store was opened in 1921 by Edward Elgar. It floated on the London Stock Exchange in 2002, valued at £1 billion and shares hit an all-time high of 274p in 2005. On Monday they closed at 1.1p, valuing it at just £4.7 million.