The Gills faced Halifax Town in the second last match of the 1992-93 Division Three season, in what was to be the deciding game for relegation to the Football Conference. Many fans were convinced that if the Gills were to be demoted out of the League, the club would fold altogether. In the event, the Gills won the match to achieve survival and Halifax were demoted. Nonetheless, the financial crisis continued at Priestfield, and steadily improving league form did little to hide the fact that Gillingham were in real trouble of going out of existence.

The club eventually went into administration in January 1995, and by the end of the 1994/95 season, with the threat of being expelled from the Football League and closed down, fans were wondering whether they had seen the last ever Gills match. However help was on its way in the form of a last ditch purchase of the club.
In June 1995 a London-based former office supplies salesman, Paul Scally, entered in and purchased the club for £1.00 from Tony and Val Smith who agreed to write off a million pounds of their own money and loaned the club £750,000 interest free for 5 years. He brought in Tony Pulis as manager, who purchased almost a complete new team and led Gillingham to promotion in his first season, finishing second in the old Division 3, now Football League Two. This season was also memorable for the fact that the team only allowed in 20 league goals - a league record for a 46-game season. They consolidated their league position in Division 2 in 1996/97 with an eleventh place finish, then the season after the club were unlucky to miss out on the playoffs on goal difference, finishing eighth. In 1999 they made the playoffs, finishing fourth, but suffered defeat to an infamous Football League Second Division play-off final against Manchester City. Following goals by the prolific partnership of Bob Taylor and Carl Asaba, 'The Gills' were 2-0 up with less than two minutes left only to see Manchester City score twice, the equaliser in a hotly disputed six minutes of injury time, and after that win a penalty shoot-out 4-2.