The board of directors of the Hawk's Well Theatre, the leading theatre in the north-west, resigned yesterday, thus paving the way for funding from the Arts Council.
The council had refused to provide money to the Sligo theatre for 2005 until the board was disbanded in line with the recommendation of an independent review. Although four members resigned in recent months, five would not go, including the mayor of the town, Cllr Declan Bree.
He claimed the council was placing unfair pressure on the board to stage more professional productions while at the same time not providing the funds.
Staff and local drama companies who use the theatre feared it would close within weeks if the dispute was not resolved. They wrote last week to the Minister for Arts, Sport and Tourism, Mr O'Donoghue, urging him to intervene.
In an unexpected development yesterday, Mr Bree and the other four remaining directors announced their resignation. They said in a statement they had remained on because they hoped to oversee changes recommended in the review without disruption to the theatre. But it became clear that "neither the goodwill nor time" now existed for that, so they were resigning.
It is understood that an interim board will be appointed in the next few days.