The decision was taken at a meeting of creditors following a recommendation by Hertie’s bankruptcy administrators after a group of potential investors pulled out, the company said in a statement.
The group of investors were unable to agree with Dawnay Day on rental terms for the Hertie stores.
The company said it would soon begin talks with the works council about the fate of its 2,800 employees.
Hertie filed for insolvency last July after all plans to restructure the chain failed.
The company operated stores for more than a century in Germany, where household consumption has been sluggish for several years despite falling unemployment and big department stores have lost much of their appeal.
Dawnay Day bought the Hertie stores in 2005 from the KarstadtQuelle group, which has since renamed itself Arcandor.
The name Hertie disappeared when it was bought by Karstadt, but resurfaced when Dawnay Day and another investment fund, Hilco, bought the stores along with some smaller Karstadt outlets and revived the brand in early 2007.
This week Germany’s Metro retail group expressed interest in buying the Karstadt chain, which has also fallen on hard times. Its owner Arcandor has requested a public loan guarantee of €50 million ($896 million).