The move wipes out the stake held by Sports Direct tycoon Mike Ashley in the business, and those of all other shareholders.
It also cancels plans for an emergency shareholder meeting in which Mr Ashley was to seek his appointment to the board and attempt to oust most other directors.
Administrators at FTI Consulting were appointed to the retailer at just before 10am on Tuesday and immediately sold the group’s operating companies to a new entity owned by its lenders.
The process does not affect the retailer’s pension scheme, suppliers, landlords or its immediate trading plans.
Chairman Terry Duddy said: “It is disappointing to reach a conclusion that will result in no value for our equity holders.
“However, this transaction will allow Debenhams to continue trading as normal; access the funding we need; and proceed with executing our turnaround plans, whilst deleveraging the group’s balance sheet.
“We remain focused on protecting as many stores and jobs as possible, consistent with establishing a sustainable store portfolio in line with our previous guidance.”
Earlier in the day, Mr Ashley’s Sports Direct had made a revised £200 million rescue offer for Debenhams, delaying the department store’s administration.
The offer involved underwriting a rights issue which would have seen existing investors buying newly-issued shares and was an advance on an £150 million plan tabled on Monday, which was rejected.
Under the proposal, Debenhams’ lenders would have had to agree to write off £82 million of its £720 million debt mountain, as well as install the tycoon as chief executive.
Lenders to Debenhams said the proposal, on the terms set out, was “not sufficient”.
Debenhams said in a statement: “The board confirms that it received a revised, highly-conditional, proposal from Sports Direct in the early hours of April 9, which indicated a willingness of Sports Direct to underwrite an equity issue of £200 million.
“The company’s lenders have confirmed to the company that the proposal, on the terms set out, was not sufficient to justify an extension to the 8 April deadline.”
The pre-pack administration undertaken by the struggling department store chain will see its debt reduced and comes ahead of a wider restructuring which will see around 50 stores.
It will also see a £200 million refinancing plan, announced in March, go ahead.