Outsourcing giant Interserve has failed to persuade shareholders to approve a rescue plan for the company.
Interserve said it would apply to the High Court later on Friday for the business to be put into administration.
Although the firm says services will continue as normal, its failure has sparked more debate over using private outsourcers for public services.
Interserve has 45,000 UK staff, and 65,000 globally, cleaning schools, and running catering and building projects.
Shareholders voted 59.38% against the plan, which would have seen their stake reduced to just 5%, with lenders being handed the lion’s share of the business.
Interserve said: “The board of directors of the company is convening an urgent board meeting to consider its options.” However, the company added that “in the absence of any viable alternative” it is likely to formally apply to go into administration.
Accountants EY have been lined up as administrators.
EY is expected to carry out a so-called pre-pack administration, an insolvency procedure under which a company arranges to sell its assets to a buyer before administrators are appointed.
This means Interserve can avoid a Carillion-style collapse.
Creditors lose out
Interserve’s lenders including banks RBS and HSBC, and investors Emerald Asset Management and Davidson Kempner Capital, are expected to take control once the process is complete.
Existing shareholders will see the value of their investments wiped out. And accountancy firm UHY Hacker Young said trade creditors and other lenders – owed about £775m – will get almost nothing back.
“Secured lenders, including banks, will get first bite of the cherry. The majority of trade creditors, who are likely to be smaller companies and other sub-contractors, can expect minimal back on what they are owed,” said Hacker Young partner Peter Kubik.
“Many of smaller companies may not have trade insurance either as this would have been difficult for them to obtain amid a flurry of recent profit warnings from Interserve,” he added.
Interserve accumulated debt after construction project delays and a failed energy-from-waste project in Derby and Glasgow.