The stationery chain confirmed it has hired advisers from Begbies Traynor Group (BTG) and PwC to assess options for the future of the company.
It came after Sky News reported that Begbies Traynor has been put on standby to handle a potential insolvency.
It is understood the company could be bought through a pre-pack administration.
However, Paperchase stressed it is still considering a solvent sale as a going concern and has had interest from a number of possible suitors.
A spokesman for Paperchase said: “We confirm that we have retained BTG and PwC to advise Paperchase on strategic options, including the sale of the business as a going concern to new owners.
“Talks are continuing with a number of interested parties.
“All Paperchase stores and the website will continue to trade as normal during this period.
“We can’t comment further on this process until discussions with interested parties have been concluded.”
It’s the second time in two years the retailer has been on the brink of administration after it filed a notice to appoint administrators in January 2021.
It later said the management team has secured the chain’s continued presence in the UK retail landscape, “albeit in a smaller and more streamlined manner” with over 90 of the chain’s 127 branches retained by the new owner. At that time, it employed around 1,250 people.
The firm put itself up for sale once again earlier this month after being bought by investor Steve Curtis in August last year. Curtis said he had plans to expand the total number of stores to 150.
The number of companies going bust rose by almost a third in December according to official numbers out today, in a stark reminder of the impact of high inflation and the cost of living crisis on businesses.
According to the government’s Insolvency Service, the number of companies registering with it was just under 2,000 in the month, up 32% year-on-year and 76% higher compared with 2019, the last year before the pandemic hit.