Former Watford chairman Jimmy Russo has turned down the club's plea to defer the repayment of his £4.88million loan and will instead put them in administration.
Russo resigned on Tuesday and demanded his money back by Thursday despite the ramifications for the club, who would be deducted 10 points and plunged towards the relegation zone in the Coca-Cola Championship.
Hornets manager Malky Mackay and legendary ex-boss Graham Taylor - now acting chairman - have begged Russo to suspend his demand in favour of a £7.5million rights-issue rescue package from majority shareholder Lord Michael Ashcroft.
But Russo has snubbed the proposal and is to call in the administrators.
In a statement issued via his company, Valley Grown Salads, Russo claimed the proposal from Lord Ashcroft's company, Fordwat Limited, is not viable.
Russo also says his "significant and repeated" efforts to save the club have been rebuffed by the club and Lord Ashcroft.
The statement read: "The rights issue proposal, while it might superficially be attractive, does not bear close examination. It gives Fordwat the opportunity to consolidate its control of the company without making an offer to other shareholders.
"In the circumstances, VGS has rejected the proposal, has announced its intention to appoint an administrator of the club and will now be serving a formal demand on Watford Leisure PLC under the terms of its guarantee for repayment of the debt owed by the club to VGS.
"VGS has been left with no alternative than to take these steps. It does so with the greatest reluctance and only after significant and repeated efforts on its part to salvage the club have been rebuffed by the board and by Fordwat."
A senior Watford source tonight told Press Association Sport: "Russo's actions prove this is no longer about money, it is about control of the club.
"These people are playing with the future of this football club. The people who were saying they would not put this club into administration are now doing just that."
Former Watford owner Sir Elton John, who is planning a benefit concert for the club in the summer, is being kept informed of the situation.
Taylor was tonight scathing of the actions of Russo and his brother Vince, the club's former vice-chairman.
Taylor told Sky Sports News: "The Russos will not accept an offer that is on the table which if they did accept that they would be paid back their £4.88million, but it would be paid back in three to four weeks.
"I am at a loss to understand what it is that is making them take this action.
"I'm starting to feel now that there must be something malicious about them. I am very annoyed because I think they are putting the whole club at risk. This is unnecessary, this can be prevented.
"We have a situation available to us which would stop us going into administration but they are refusing to accept that. Why?
"You've got to wonder why is he doing this? Does he see a chance that he is going to come in and buy it himself?"
Taylor added: "I've spoken to Sir Elton John and he is at a loss to understand why this is happening. He himself is more than disturbed that the Russos are taking this course of action."
Jimmy Russo responded to Taylor's comments by insisting he has no desire to see the club enter administration.
He told Sky Sports News: "I want us to sit around the table and come up with a sensible solution to take the club forward.
"It's not my priority to put the club into administration. It's not what I want to do.
"I would like the other party to come to the table and agree a sensible and balanced way forward so that everybody benefits."
Russo described the proposal placed to him by Fordwat as "wholly unacceptable", adding: "It was a ridiculous offer.
"It entailed that I had to produce another £2.25million to buy my 30% stake back, so I get my £4.8million, then I've got to produce another £2.3million to retain my position in percentages.
"What they forgot to tell you is that they haven't offered me a place on the board. So, in essence I produce the money, I put the money into the club and actually have no say as to the way the business is being run."
He added: "In my opinion, there is an unlevel playing field. The club is the heart of the Watford community and I can't become a bad guy overnight."
