Southern Kings have been put into voluntary liquidation, throwing further doubt on the future of the South African Pro14 franchise.
Kings had already suspended all rugby activity for the remainder of 2020.
They were unable to travel for Pro14 fixtures due to coronavirus restrictions and had withdrawn from South Africa's domestic competition.
Shareholders Eastern Province Rugby Union (EPRU) and SA Rugby took the decision due to a deficit of £2.6m.
"The hard fact is that the Kings are insolvent, with significant debts and zero assets and it would have been reckless of the board to continue to trade," said Andre Rademan, chairman of the board of SA Super Rugby (Pty) Ltd - which trades as the Southern Kings.
"Its continuation would have required loans from the EPRU and loans additional to the R45m that the company already owes to SA Rugby.
"In the absence of any rugby in 2020, and without any guarantees as to income prospects for 2021, it would have been financially irresponsible of the shareholders to have pumped in further funding."
Southern Kings were created in 2009 and joined the expanded Pro14 for the 2017-18 season - playing against teams from Ireland, Italy, Scotland and Wales - along with fellow South African side Cheetahs.
The Pro14 has been asked for its response to the situation with Southern Kings.
SA Rugby resumed ownership of a 74% shareholding in the Kings in June following the failure of the previous owners - the Greatest Rugby Company in the Whole Wide World (GRC) - to honour contractual commitments in relation to its purchase of the shares.
The Kings' financial struggles have seen the franchise twice fall into management control by SA Rugby.
"This is very difficult news to give to people and the board would not have wanted it this way, but sport is a business and we are in unprecedented times. There was no other option," Rademan added.