Instant Muscle became a company in 2005 but retained its charitable registration. It has been involved in delivering back-to-work services for the Government and was awarded a multimillion-pound contract to run part of the Department for Work and Pensions Pathways to Work scheme in November. The scheme aims to help long-term unemployed people on incapacity benefit to return to work.
Henry Shinners, associate director at accounting firm Smith & Williamson and one of the appointed administrators, said: "It found itself unable to pay liabilities, which meant not being able to pay staff at the end of February."
Parts of the business could be taken over by other companies in the coming weeks, he added.
A former Instant Muscle employee, who did not want to be named, said it had expanded too quickly and "flown a bit too close to the sun".