France-Corsica ferry operator SNCM has suspended payments to creditors and will file for court protection on Tuesday, the firm said in a statement late on Monday.
Majority-owned by public transport firm Transdev, which is owned by water firm Veolia and French state bank CDC, SNCM said its management would now focus on finding a buyer for the firm.
The court protection procedure will effectively mean the end of loss-making SNCM, which is unable to repay 440 million euros ($550 million) of illegal state aid as ordered by European Union competition authorities.
Shipping companies could buy some of its ferries and take over part of its 1,900-strong staff to continue the key Marseille-Corsica lines, but other routes are expected to be discontinued.
The firm's unions, who have fought against moves to seek court protection for months, said they had no immediate plans to go on strike.
"There will certainly be other actions and reactions, but at the moment we are not thinking about striking," CFE-CGC union leader Maurice Perrin said.
For Veolia, a sale of SNCM would clear the way to unwinding its Transdev joint venture with CDC, as transport is no longer considered a core business for the water, waste and energy services group.
CDC had agreed to take over part of Veolia's Transdev stake in 2012, but did not want to take over SNCM. That deal lapsed, but Veolia Chief Executive Antoine Frerot said in August that as soon as a solution was found for SNCM, it would restart talks with CDC about selling the stake.
Veolia was not immediately available for comment.
Reporting by Geert De Clercq in Paris and Jean-Francois Rosnoblet