Directors said they would fight the decision to close the company

The decision was made at a creditors' meeting on Monday afternoon, but the theatre's board said it would fight the move in court.

The directors will challenge an Arts Council claim that it is owed �1.4m, making it the largest creditor.

Derby Playhouse Ltd went into administration in December 2007 after funding was withdrawn.

Both Derby City Council and the Arts Council withdrew funding from the theatre because of disagreements about its management.

Two rival bids to take over the running of the theatre are on the table, one from Derby City Council, which owns the theatre's lease, and one from the current chair of the board, Jonathan Powers.

A newly-formed committee will now decide who should take control.