Italian food company Parmalat has filed for bankruptcy protection under new fast-track administration rules unveiled by the government.
Parmalat is a household name in Italy
The firm, which has revealed a multi-billion euro hole in its accounts, is being dubbed "Europe's Enron".
Two teams of investigators are now ready to probe the firm's books, to see how it based its business on an allegedly fake financial statement.
Some 20 people could face charges including former boss Calisto Tanzi.
The Parmalat affair has grown into one of Europe's biggest financial scandals since last week's discovery that papers detailing a $3.9bn euro bank account on the Cayman Islands were false.
The Italian company's accounts could have been concealing a black hole as big as 10bn euros, according to the latest reports.
Inherited Parmalat age 22
Chief executive for 40 years
Handed control to son, Stefano, in 2001
Net worth estimated at $1.3bn
Owns AC Parma football club
Now under investigation
Investigators said people questioned on Tuesday detailed a web of financial deception dating back more than a decade and
approved by senior managers.
That could also potentially have grave implications for the company's auditors, the Italian branch of Grant Thornton.
Grant Thornton is insisting that its staff have acted correctly, and that the fake document has made them a "victim" of fraud.
The firm looked almost certain to go into administration once the extent of its financial troubles became apparent.
On Tuesday, the Italian cabinet approved a new law making bankruptcy proceedings swifter for large companies and giving them a better chance to restructure successfully.
"The government couldn't sit still," Prime Minister Silvio Berlusconi said, adding
that the new decree was designed to protect jobs at Parmalat.
The new rules for so-called "extraordinary administration" has allowed for the immediate appointment of Enrico Bondi, a corporate turnaround specialist chosen to supplant Mr Tanzi, as administrator.
He will have the job of drawing up a restructuring plan for the government to approve, and decide whether or not to sell off parts of the company.
The company's financial straits are such that despite claiming 4.2bn euros in liquid assets, it had run up a 120m euro milk bill with Italy's farmers.
The mismatch has triggered questions about how Italy's financial regulators could have missed problems at Parmalat.
A tough task awaits Mr Bondi
Central bank Governor Antonio Fazio, responsible for overseeing the banks which lent to Parmalat, angrily denied rumours that he would resign, blaming stock market watchdog Consob for the trouble.
The government is now fast-tracking new powers to beef up Consob by early January - and could go further, amalgamating the multiple agencies into one super-regulator.
Italy has also been forced to call on the European Union to waive its rules on state aid to prevent Parmalat's woe from creating a wider dairy sector crisis.
The government has said the firm, which employs 36,400 people, is important to the Italian economy.
The government is primarily concerned to minimise any wider fall-out from Parmalat, which plays a crucial role as Italy's biggest food company, purchasing 8% of the country's milk production.