TEG Group was forced to call in administrators on Friday after attempts to raise funding failed.
The cash-starved firm has been fighting for survival since October when its shares were suspended on the AIM market as it tried to negotiate further financial backing.
Administrators from Deloitte immediately disposed of its Midlands-based composting business Simpro to Veolia ES (UK).
Other businesses TEG Environmental and TEG Energy are continuing to operate under the control of the administrators while they look at selling the operations.
TEG has been in talks for more than two years with Costain in a bid to release £2.8m in retention held on its Greater Manchester waste contract.
TEG won a £38m contract back in 2009 to provide four specialist composting facilities by 2011 as part of Europe’s largest waste PFI.
But alleged design faults have delayed completion of the facilities which are due to handle 175,000 tonnes per annum of green and food waste.
TEG has carried out remedial works for Costain in a programme of works to finish the contract.