Leeds United now have no chance of evading relegation

The move means United will be docked 10 league points immediately, ensuring relegation to League One next season.

A new firm headed by Mr Bates, already a major shareholder, will buy the club pending approval by its creditors.

Leeds have struggled financially in recent years and faced a winding up order from HM Revenue and Customs.

Debt issue

Administrators KPMG said the Championship club had debts of �35m - owing HMRC �6m - and could have been forced into liquidation next month if it had not made this move.

This agreement has been reached quickly to maximise the possibility of survival Richard Fleming, KPMG Leeds relegation fate sealed

By going into administration, the debts held by a number of leading creditors - including Mr Bates - will be effectively wiped out.

But the sale must be approved by a majority of the club's creditors, including HMRC, next month, and must also be backed by the Football League.

"This agreement has been reached quickly to maximise the possibility of survival of this major football club, to minimise uncertainty for all the Club's shareholders and supporters and to allow the Club to plan ahead for next season," said KPMG's Richard Fleming.

"There is now a big decision for the creditors to make."

The news of the sale comes just hours after the Leeds United Supporters Trust told the club it was in a position to make a serious proposal to buy it.

Ken Bates has been trying to woo new investors

In recent years the club has sold its Elland Road home ground and its Thorp Arch training ground to cover previous cash shortfalls, caused by expensive player contracts in the early years of the decade and its relegation from the Premiership.

By entering administration, its finances can be reorganised and some debts eliminated.

However, football related debts - including �11m owed to staff, players, former managers and other clubs - will transfer to the new owners.

Points penalty

One football analyst said the club was in urgent need of financial restructuring since it had run out of valuable assets left to sell.

"Everything turns on getting this deal agreed by creditors and them agreeing to take far less than they are owed," said Professor Tom Cannon, from the University of Buckingham.

Mr Bates and chief executive Shaun Harvey - also a key figure in the firm set to buy Leeds - had been working hard to attract new investment but without success.

Mr Bates took control of Leeds in 2005, after making about �17m from the sale of the club to Roman Abramovich the year before.

He and other members of the Forward Sports Fund have loaned the club �18m since then, most of which, it now appears, will be written off.

They also own shares in the club worth �4m, which are now almost worthless.

The Football League confirmed that under rules introduced in 2003, Leeds would now be deducted 10 points.

By going into administration before Sunday's final game of the season, Leeds will have the points deducted while they are still in the Championship rather than - as could have been the case - next season in League One.