The public railway says it is insolvent to the tune of £350,000 and there is no prospect of meeting the liability.
However it says it hopes to continue operations and that employees whose jobs are now under threat can be rehired in the future.
Customers who have purchased tickets in advance, including driver experiences, deposits for weddings and gift vouchers, will either be refunded with reserved money or will be able to travel at a later date.
The steam railway, which runs from Llangollen to Corwen, has been unable to operate during the coronavirus lockdowns. But its says it is engineering contract disputes that have led to the receivership.
Its uncertain future will be a blow to the area, with the railway attracting hundreds of thousands of visitors from across the UK to Llangollen every year.
A statement from the railway issued on Monday said: "It is with great regret the directors of Llangollen Railway PLC have had to take the reluctant step of inviting the bank to appoint a receiver.
"The company’s accounts show pre-tax losses of £330,601 in 2018, £329,175 in 2019 and £258,804 in 2020 - pre-audit.
"A number of significant engineering contract disputes, all of which arose in the years prior to the current board taking over in October 2020, have crystallised in the last few days.
"The claims against the company are compelling and are in excess of £250,000 in total. There is no prospect of meeting these liabilities, even over an extended period.
"As a result the balance sheet is now insolvent to the extent of £350,000 approximately, adjusting for intangible assets also. In such circumstances the company cannot legally continue to trade."
The directors paid tribute to what they called the considerable support of the Welsh Government through two significant grants, and NatWest Bank which, together with furlough payments, have enabled the company to continue to meet its commitments over recent months until now.
"The Trust’s balance sheet remains solvent and there is some cash in hand. The Trust board will need to take steps to negotiate with the receiver to try to secure the line and preserve rolling stock and infrastructure to the extent possible. It is intended to recommence operations in due course, but this is dependent upon legal and regulatory approvals, including licencing, all of which will clearly take time."
Anyone wishing to make a claim in the receivership should contact the Railway by e-mail at firstname.lastname@example.org and details will be passed to the receiver.