Premiership and European champions Saracens have been docked 35 points for breaching salary cap regulations.
The punishment comes after an investigation into business partnerships between chairman Nigel Wray and some of the club’s players.
Saracens have also been fined £5.36m, with the points deduction coming into immediate effect in the Premiership.
The charges relate to a failure to disclose player payments in each of the 2016-17, 2017-18 and 2018-19 seasons.
Saracens have said they will appeal, having said in March they “readily comply” with the regulations.
They claimed to be able to spend above the £7m cap because of the high proportion – almost 60% – of home-grown players in their squad.
During an independent disciplinary panel hearing, Saracens saw their challenge of the validity of the regulations on competition law grounds rejected.
In the five seasons that Saracens have finished as Premiership champions, a 35-point deduction would have meant they would not have reached the play-offs – but would also not have been relegated.
They would have finished 10th last season had the same punishment been imposed in 2018-19.
Saracens, who have won two of their three Premiership matches so far this season, are entitled to seek a review of the decision by an arbitration body.
The deduction will put them bottom of the table on -26 points before their trip to Gloucester on Saturday.
Premiership Rugby introduced their salary cap in 1999 to ensure the financial viability of all clubs and the competition.
The regulations are also designed to control inflationary pressures on clubs’ costs and provide a level playing field for clubs and a competitive Premiership.
Saracens started the current Premiership campaign with a significant number of their star players still on World Cup duty.
Eight of their players were in the England squad which lost to South Africa in the final, including new signing Elliot Daly, who completed a move from Wasps in the summer.
‘The biggest story in English club rugby history’
Analysis: BBC rugby union correspondent Chris Jones
Saracens have been the dominant force in the domestic game for the best part of a decade – scooping seven major titles and providing the spine of the England World Cup team – but that success will now be considered tainted.
How long has it been going on? Will the club keep their titles? Will they appeal, given they insist they were involved in legitimate business dealings with players? What happens now to the current squad, which may need to be dismantled, especially with a £5m fine and the threat of relegation?
And what do players, coaches and fans at other clubs think, given everyone is affected in some way by this? On that note, do any other clubs in the league have something to hide?
Like with the Bloodgate scandal 10 years ago, the fallout to this will be significant and lengthy, and will damage the integrity of the Premiership just at the point the league is looking to launch a global expansion.
This is probably the biggest story in English club rugby history.