Insolvency proceedings were opened in Germany on Monday, after administrators were unable to find any investors willing to buy the struggling company.
BenQ Mobile filed for insolvency in September 2006, when Taiwanese hardware manufacturer BenQ said it was pulling out after suffering "unsustainable losses."
BenQ Mobile was created less than two years ago, when BenQ bought German-based Siemens' mobile arm. At the time, Siemens effectively paid BenQ $97.5 million to take the business off its hands. BenQ had hoped to developthat would rival those of major players such as Nokia, but its market share has declined.
Under German law, a company has three months' grace after filing for bankruptcy before formal insolvency proceedings begin.
As many as 3,000 employees could lose their jobs unless a buyer comes forward for the business.
The collapse of BenQ Mobile underlines how competitive today's handset market is. However, analysts have also blamed the company's management.
"Many of the product launches were fairly poor," said Windsor Holden at consultancy firm Analysis, back in September. "Even when the product seemed promising, the company failed to launch on time. It's been a mess, frankly."
The administrators are expected to release new information about BenQ Mobile's future on Wednesday.
Graeme Wearden of ZDNet UK reported from London.