Sir Peter, former director of the National Theatre and Royal Shakespeare Company, said the pounds 3m deal with the Jerwood company was a "typical sign of the times ... The Royal Court isn't the Jerwood theatre. It has 100 years of history, and Jerwood are buying those 100 years for pounds 3m."
The playwright Harold Pinter said he found the decision "confusing". Bill Alexander, artistic director of the Birmingham Repertory Theatre, said: "It's horrible ... It will be a crying shame if the only way that theatres can get money from sponsors in the future is to do this."
Under the deal the Jerwood Foundation will give the publicly subsidised theatre the final pounds 3m needed to complete its pounds 26m rebuilding costs.
It had originally wanted the Royal Court to change its name to the Jerwood Theatre but after an outcry a compromise was reached between the Royal Court chairman, the writer Sir John Mortimer, and the Jerwood chairman, Alan Grieve.
However, the deal, though it allows the Royal Court to keep its name, will enable Jerwood to have its name in lights above the theatre's Sloane Square home. The Royal Court had been threatened with going into liquidation next year, still needing pounds 3m to complete rebuilding.
The agreement means the Royal Court's two auditoria will be called Jerwood Theatre Downstairs and Jerwood Theatre Upstairs.
Outside, the original stone and ironwork on the facade will still read Royal Court Theatre, but a neon sign above the main entrance will highlight the Jerwood Foundation's support with the wording "The Jerwood Theatres at the Royal Court Theatre".
Sir John said: "I am enormously relieved that the negotiations have been ... resolved and we can now go forward to provide a rebuilt and hugely improved theatre for new writing."
Mr Grieve said: "We have had a robust debate on our proposed capital funding ... We have now achieved a reasoned way forward."Reuse content