Portsmouth was given a stay of execution today as bosses were granted extra time to fight a winding-up petition.
The club faced High Court proceedings over a multimillion-pound unpaid tax bill after talks with Revenue and Customs failed.
It now has one week to draw up a statement of its financial affairs.
Chief executive Peter Storrie has said Pompey is hopeful of finding a new owner - which would be its fifth this season - and the bill could then be paid.
Mrs Registrar Derrett said she feared the company would continue to trade and build up more debts that would not be paid.
She said: "I am very concerned about the financial status of this company. It seems to me there's a very real risk that this company is undoubtedly trading while it is insolvent.
"I'm obviously conscious that, by making a winding-up order, it would have very severe consequences not only for the company as a business but for the supporters themselves, but that's not a consideration that I strictly take into account."
Portsmouth faces a VAT bill of £7.4million which it is disputing with HMRC.
It also owes £4.7million in unpaid PAYE and National Insurance which were not part of today's petition.
Representing HMRC, Gregory Mitchell QC said: "It's quite clear beyond any doubt at all that this company is insolvent. They have failed to provide any evidence at all as to their solvency. There are many debts and they are unpaid."
Representing the club, Nigel Hood said new owner Balram Chainrai would run the company until it was financially stable and then sell it on to someone who wanted to "operate the business as a football club".
He said any move to force the club to wind up would have "very serious consequences".
Mr Hood said: "There would be irreparable harm caused not only to the suppliers but to the employees, 600 staff, suppliers, people who have paid in advance for their season tickets would lose their money."
The case will be heard by a judge on a date after February 19 which has yet to be fixed.