Gary Lineker is spearheading a consortium bidding to take control of cash-strapped Leicester.
The First Division club today applied to the High Court to be placed into administration.
Leicester, who were relegated from the Premiership last season, last week agreed a wage deferment package with their players in a bid to ease their financial problems.
City are the latest in a long line of clubs to feel the pinch due to the downturn in the football economy over the past year.
The club's Plc chairman Greg Clarke revealed that they had come close to reaching agreement with creditors after meetings over the weekend but late problems left administration as the best option.
He said: "Whilst this is a severe setback for the club it does not mean the end of Leicester City."
Administration will give the club the opportunity to restructure their finances and discuss a possible takeover with Lineker's consortium.
Lineker, who scored 48 goals for England, played for Leicester for seven years from 1978–85 before moving on to Everton, Barcelona and Tottenham.
His consortium has the backing of both Clarke and football club chairman Martin George. A press conference regarding the issue will be held on Wednesday.
The consortia, led by Lineker, is backed by Clarke, club chairman Martin George, Carphone Warehouse chief operating officer David Ross and Jon Holmes of SFX.
Clarke added: "The objective of the consortia will be to buy Leicester City as a going concern from the administrator and to back Micky Adams and the team in their quest for promotion.
"Progress on the formation of the consortia and the timelines involved in buying the club out of administration and into private ownership will be reported back as soon as is possible.
"In the meantime I would encourage the people of Leicestershire to get behind both the fund–raising activity and to support the team through this difficult time."
Leicester will follow Second Division Barnsley, who were placed into administration earlier this month.
The club's finances have been a serious concern since their relegation and speculation over their future has overshadowed their move from Filbert Street to the Walkers Stadium.
However, in spite of their difficulties, the club have made a promising start to the new season and are currently third in the table.