The founders of the Madrid-based outfit behind titles including Rime and Gylt have also stepped down, GamesIndustry.biz reports.
The news follows last month's announcement that Tequila Works was laying off a "small" number of staff following the decision to cancel an unannounced project that had been in development.
In a statement, newly appointed general manager Térence Mosca said he was "proud of what [the team] has accomplished together" but "prolonged market conditions" meant the company had to file for insolvency.
"Since its founding in 2009, Tequila Works' game-development philosophy has always focused on 'creating things with gusto'," the statement said.
"We are doing everything we can to provide support and guidance to our teams during this difficult time."
Tequila Works' debut game was 2012's Deadlight. Notable releases in the years since have included 2017's Rime and The Sexy Brutale, and 2019's Gylt.
Tencent became the company's majority shareholder in 2022, when Tequila said the funding would be used to fuel studio growth for the development of original IPs.
Its most recent game was last year's Song of Nunu: A League of Legends Story, which was released under the now defunct Riot Forge publishing label.
Rime studio Tequila Works has filed for insolvency | VGC
Tequila Works’ founders have stepped down amid mounting financial troubles…
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