The administration is expected to be handled by Poundworld's advisors Deloitte.
The future looks dismal for Poundworld's 5,300-strong workforce as any solvent sale would trigger a painful restructure, leading to 100 store closures out of its 335-strong estate and the loss of thousands of jobs.
On Thursday the retailer, which has 5,000 staff, filed a notice of intention to appoint an administrator.
The company's management have said they are in talks with other potential buyers, and it is thought that Poundworld's founder, Chris Edwards, might take on the business.More news: EU Will Act Against US Tariffs On Steel, Aluminum: Merkel
Sources told PA that the notice would give Poundworld time to put together a deal - which could be undertaken through a controversial pre-pack administration - with private equity firm R Capital, former owner of Little Chef.
Deloitte has been preparing contingency plans for an administration in the event of takeover talks collapsing.
However, pre-tax losses widened to £17.1m from £5.4m the year before.
Up until Wednesday night, it had been in talks with Alteri Investors, a group which specialises in turning around struggling businesses.More news: Italy and Malta refuse to dock migrant ship carrying 629 people
Edwards, 67, founded Poundworld in 1974 and he and his family pocketed millions when it was sold to TPG in 2015 for £150m.
In May it emerged that TPG had chose to cut it losses and was putting Poundworld, which started in 1974 as a market stall in Wakefield in West Yorkshire, up for sale.
Poundworld, which also trades under the Bargain Buys brand name, serves two million customers a week.
Retailers Maplins, Toys "R" Us, Mothercare, Carpetright, plus a string of restaurant chains, have hit the headlines this year because of trading trouble.More news: Wolfenstein: Youngblood passes the Nazi-killing baton to BJ's twin daughters
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