The ultimatum was delivered by the Arts Council after a meeting in Edinburgh to consider Scottish Ballet's future. The company was told that the remainder of its annual pounds 2.12 million grant would be withheld unless its chair, Oona Ivory, and the entire board resigned.
The decision stems from a funding crisis affecting Scotland's four national arts companies: Scottish Ballet, Scottish Opera, the Royal Scottish National Orchestra and the Scottish Chamber Orchestra.
The Arts Council lost patience with the ballet company after it withdrew from a plan to share orchestra resources with the opera, which would have generated savings and led to the provision of an extra pounds 2.4m for the arts by the Scottish Office.
As another condition for releasing the remaining pounds 571,000 of Scottish Ballet's grant, the Arts Council is demanding that the company re-focus its artistic vision and move away from the large-scale classical productions that have been its mainstay.
It also wants it to agree to a radical restructuring that would help it to operate within its present budget. Magnus Linklater, chairman of the Arts Council, said last night that if Scottish Ballet did not meet the conditions, "it will go to the wall".
Lucy Shorrocks, the company's marketing director, said that the company would decide on its response at a board meeting to be held within the next week. "We can't say anything more until then," she said.
The Arts Council's demands follow a campaign by Scottish Ballet to safeguard its future. Earlier this week, two dancers delivered a 50,000-name petition to Downing Street, calling on the Prime Minister, Tony Blair, to intervene to save the 30-year-old Glasgow-based company.
Princess Margaret, its patron for the past eight years, has written to Sam Galbraith, the Scottish arts minister, expressing her "grave concern" at the situation.
Mr Linklater says Scottish Ballet will keep the same level of grant, but should produce a wider range of medium and small-scale works, without compromising its artistic standards. Its current repertoire - mainly Swan Lake - did not allow for flexibility or variety, he said. "More to the point, we cannot afford it."Reuse content