The high street fashion chain, which owns Peacocks and Jaeger, has 24,000 staff.
It has now lodged a notice of intention to appoint administrators to look for potential buyers as it attempts to keep the business afloat.
Bosses told staff on Friday morning that national and local coronavirus lockdowns had hit sales hard.
The company also blamed allegations, which it denies, that it and several rivals failed to pay some Bangladeshi suppliers during lockdown in an attempt to cut the cost of clothes they were unlikely to sell.
For now, EWM Group's stores will continue trading while insolvency specialists spend 10 days preparing an urgent review ahead of further action.
The action will be announced later.
EWM chief executive Steve Simpson said: "Like every retailer, we have found the past seven months extremely difficult.
"This situation has grown worse in recent weeks as we have had to deal with a series of false rumours about our payments and trading which have impacted our credit insurance.
"Traditionally, EWM has always traded with strong cash reserves and a conservative balance sheet, but these stories, the reduction in credit insurance, against the backdrop of the lockdown and now this second wave of COVID-19, and all the local lockdowns, have made normal trading impossible.
"As directors we have a duty to the business, our staff, our customers and our creditors to find the very best solution in this brutal environment.
"So we have applied to court today for a short breathing space to assess our options before moving to appoint administrators.
"Through this process I hope and believe we will be able to secure the best future for our businesses, but there will inevitably be significant cuts and closures as we work our way through this.
"I would like to thank all our staff for their amazing efforts during this time and also our customers who have remained so loyal and committed to our brands."
An FRP spokesman said: "Our team is working with the directors of a number of the Edinburgh Woollen Mill Group subsidiaries to explore all options for the future of its retail brands Edinburgh Woollen Mill, Jaeger, Ponden Home, and Peacocks."