A major supplier to Poundland has urged ministers to block the retailer's owners from forcing the business into administration.
BMI Limited, which owns pet food brands such as Vitagen and Husky, has written to the Government calling on ministers to "prevent a serious abuse" of insolvency laws.
In a letter to Jonathan Reynolds, the Business Secretary, Ravi Madan, of BM International, said that the only "sane outcome" was for Poundland to remain solvent.
Barry Williams, the chief executive of Poundland, told staff on Monday, in a meeting dubbed internally "High Noon", that recent sales were ahead of expectations. Like-for-like sales rose 11.4pc last week, boosted by Hallowe'en.
Mr Madan pointed to Poundland's recent momentum as evidence that Gordon Brothers, Poundland's US owner, was wrong to seek to tip the business into insolvency.
"We wish to urge the Burnham Government to take action to prevent a serious abuse of UK administration laws, protect jobs and protect all stakeholders," he said.
Poundland is facing imminent collapse after its directors filed a notice to appoint administrators on Oct 29.
This triggered a 10-day moratorium that prevents creditors from calling in their debts, giving directors a window to find buyers for as many stores as possible.
The filing came after Gordon Brothers rejected a solvent offer from Martin Property Group.
However, sale talks collapsed after Martin Property Group signalled it was unwilling to pay off a £30m shareholder loan up-front. Gordon Brothers acquired the loan for just £1 as part of its original buyout last year.
Mr Madan criticised Gordon Brothers' decision to withdraw funding from Poundland last week, which has led to some suppliers not being paid.
That includes BMI Limited, which has halted supplies to Poundland.
"Gordon Brothers have acted in a despicable way with no regard for others," he said.
"By trying to force the business into administration, they are attempting to obtain repayment of a loan (which is not yet due), by not paying debts owed."
This not only threatens thousands of jobs at Poundland but also at affected suppliers, he added.
"Gordon Brothers have cut off cash to the business in a blatant attempt to force Poundland into administration," he said. "Suppliers and other stakeholders are already going unpaid."
Steve Smith, Poundland's founder, has warned that as many as 30,000 jobs could be lost if Poundland collapses, given the effect on its supply chain.
Mr Madan suggested that Gordon Brothers would profit from Poundland's insolvency by selling off stock provided by suppliers in the run-up to Christmas.
The Government has said it is "deeply concerned" by the chain's plight. Mr Reynolds signalled to The Telegraph last night that he was willing to take action against Gordon Brothers if he finds any evidence of wrongdoing.
Robert Jenrick, Reform's Treasury spokesman, wrote to Norma Kuntz, Gordon Brothers' chief executive, on Monday demanding an urgent meeting.
"As things stand, it looks very much as though Gordon Brothers is using the administration process to make quick money on the back of a firm it paid £1," he said.
This is "at the expense of 12,000 workers, thousands more suppliers, landlords, councils owed rates, HMRC and the taxpayer, who will pick up the benefits bill", he added.
Mr Jenrick said he wanted to know on what terms Gordon Brothers would sell Poundland and whether it would break up the business to recover its investment.
Mr Williams is set for a meeting with Kate Dearden, the business minister, within days, as first reported by Sky News.
Poundland would be the biggest retail collapse since BHS in 2016.
A spokesman for the Poundland board said last week that it was in talks with "several established retail operators" to sell certain stores.
"Collectively, these cover a significant part of the business, and we believe offer the best available prospects for shareholders, creditors and to preserve jobs," they added.
Gordon Brothers was contacted for comment.
