The collapse puts more than 1,500 jobs at risk and comes as a result of disastrous property investments in the late 1980s.
The decision to put Dewhurst and the Vestey family holding company, Union International, into receivership means that Union's chief executive, Terry Robinson, is likely to forfeit a £10m-plus success fee.
Mr Robinson was recruited from Lonrho by the banks in 1991 to turn Union around, and was promised the success fee if he could reduce the group's debts from £440m to zero by selling off the assets and trading the existing businesses out of trouble. The fee partly depended on him returning some value to the Vestey family.
The Vesteys put in £35m cash in 1991 as part of a three-year "standstill agreement", which ran out last October. Dewhurst asked for a further injection, which the banks turned down on Tuesday, prompting them to demand that it be put into receivership.
Union's board said yesterday that there was no future for the holding company if Dewhurst went down, and it therefore called for Union to be put into receivership as well. A bank source said: "We don't quite understand why Union wanted to go into receivership itself."
A spokesman for the Vestey family said yesterday evening: "The family are very saddened by the demise of Union International, which was one of the original parts of their business."
The Vestey business empire was founded in Victorian times when it pioneered the shipping of frozen meat from the colonies and South America to the UK. The group ran into trouble in the late 1980s when Union made a series of disastrous property investments in the UK and Australia just as the property market was about to collapse.
The receiver, Alan Bloom of Ernst & Young, fresh from rescuing Barings, the merchant bank, said he was determined to keep the butcher's shops open and sell them on as a going concern. He is working closely with Mr Robinson to save the shops.
More than 55 banks are owed money and are being co-ordinated by Lloyds Bank. Union's assets are estimated at around £100m. The banks include NatWest, Barclays, Midland, Standard Chartered, Westpac, ANZ and Royal Bank of Canada. They hold good collateral over the remaining debts, which sources described last night as "nearer to £50m than £100m."
Despite the likely loss of his success fee, Mr Robinson is reckoned by banking sources to have done a good job. According to sources close to the talks, there were tensions between Mr Robinson and the Vestey family over Union's strategy.
Union represents only part of the Vestey empire, the rest of which continues to trade normally. At 1990 the total family fortune was estimated at £2bn.
Under the 1991 standstill agreement with the banks, the Vesteys ring- fenced Union from their other activities. The businesses were split into two groups, Union and Frederick Leyland, both ultimately owned by Vestey Group. Sir John Collins was drafted in from Shell to head Vestey Group.
The five-year battle to save Union started when Tim Vestey, a family scion in his early 30s, was appointed chief executive. His plan to sell off large portions of the empire flew into opposition from other family members. In 1991 he was sacked and Mr Robinson put in his place, precipitating a bitter and public family rift.