Jonny Bell says it is "worrying for the game of rugby" after Wasps joined his former club Worcester Warriors in becoming the second Premiership club to go into administration.
Players and staff have been left without a job as both clubs were hit with season-long bans and relegation from the top flight of English rugby.
Bell, who only left Worcester in the summer to return to Ulster as defence coach, called for more regulation to prevent other clubs suffering a similar fate.
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"My heart goes out to the players and the staff, not just the rugby players and staff, but everyone there," said the 48-year-old.
"From the top players to the cleaner it was a really tight group.
"It's a very sad state of affairs. It's worrying for the game, but more importantly my friends and their families that they are now out of work.
"I just hope down the track things can be improved and they can put things in place to make it more regulated so this doesn't happen again."
Bell was speaking from South Africa as Ulster continued their preparations ahead of their United Rugby Championship clash with Cell C Sharks.
The province's 39-37 victory over Emirates Lions last weekend secured a first win for a northern hemisphere team in South Africa in this season’s URC.
But Bell knows it will be an even tougher test on Saturday at the 'Shark Tank'.
"To get that first win is a massive confidence boost, but it's a real, real challenge to do the double in South Africa," he said.
"That's because you're playing against quality opposition.
"The Sharks are a side which is littered with Springboks and full of confidence.
"They put a good Glasgow side away late in the game, and that tends to happen over here."
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