Compensation specialist Claims Direct has applied to the High Court to be put into administration.
Shares were suspended at 3.25p after the company said it had failed to raise money to secure the future of the business.
A company statement said: "It has become clear that the cash flow projections, based on anticipated continuing loss-making trading, indicate that the company could be trading insolvently within weeks."
A company administrator has now been put into place to decide whether it should be restructured, sold to a third party, or closed down.
Following adverse publicity, the company's shares plummeted and in August 2001 Simon Ware-Lane took control of the company.
Ware-Lane said: "The company's problems stemmed from the perception that Claims Direct had kept some or all of its clients' damages. That was not true."
Chief executive Ronnie Henderson blamed company's ills on the liability insurance industry, and, "poor business decisions of the previous management".
