AN 80-year-old theatre that will close this week after plunging into liquidation is likely to reopen later in the year under new management.

The Byre Theatre in St Andrews will shut its doors on Thursday but could re-emerge under the control of Fife's cultural trust.

An online campaign and a demonstration in St Andrews yesterday called for the theatre to stay open but it appears increasingly likely the theatre building, owned by Fife Council, will reopen in the near future under the umbrella of Fife's cultural body – the Fife Cultural Trust. The trust already operates theatres in Dunfermline, Glenrothes, Kirkcaldy and Lochgelly.

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It is understood the debt of the Byre Theatre is about £80,000 but it has struggled to make ends meet since the Scottish Arts Council (SAC) removed its flexible funding in 2010, a key grant of £160,000 a year .

Despite internal restructuring, the loss of this revenue funding proved to be pivotal in the demise of the theatre company that runs the building.

However, both Fife Council, which also funds the theatre, and Creative Scotland (CS), the successor arts funding organisation to the SAC, have no desire for the building – revamped at a cost of £5.5 million in 2001 – to remain "dark" for long.

Fife Council sources believe that, after the current theatre company is wound up and equipment inside the building is secured, it could be transferred to the trust in the near future.

One council source said: "Continuing as a theatre under the trust would be the proposition and that can be done. Logically that is the next step.

"The council gives the theatre £258,000 and the question would be: what can you get for that? We think it could be a working theatre again."

Creative Scotland has given money to the theatre since 2010 – in total it has received £435,970 for various projects and programmes, as well as last year's Creative Place award, worth £150,000.

However, this money did not cover the running costs of the building itself.

Byre Theatre chairman Frank Quinault said 25 staff, full-time and part-time, would lose their jobs when the theatre closed but he hoped it would reopen as part of the cultural trust. He said: "That is what should happen. What is so distressing is that this liquidation comes first.

"It could reopen very soon, as long as the building is kept watertight and the council buy the fixtures and fittings. Then it would be ready to be reopened.

"I think the key point in all this was the removal of the flexible funding by the [SAC]. We did all we could to make it work. We did our best but the position became dire."

The theatre said ticket sales and lettings have been good recently, including a successful pantomime, with audiences for live film streamings from the Royal Opera and National Theatre.

The theatre had been going to join the trust, prior to the current crisis. A total of £130,000 "transition funding" had been made available to the Byre Theatre by CS and Fife Council, but on Friday the theatre said that, "given the scale of the challenges being faced by the Byre, it became clear to us that this would no longer be a feasible option".

Grant Ward, head of leisure and cultural services, said: "We will be working closely with Creative Scotland to explore other possible delivery models. We remain optimistic there will be a future for the Byre Theatre."

Iain Munro, director of Creative Scotland, has said he wishes to see the theatre reopen "as quickly as possible".

The theatre's board is now receiving insolvency advice from Graeme Smith, Insolvency Practitioner, of Henderson Loggie of Dundee.