POLICE have been called after a major Glasgow arts company was suddenly wound up following the discovery of significant "irregularities" in its finances.

New Moves International (NMI), funded by Creative Scotland and Glasgow City Council, has ceased trading, and the planned 2012 New Territories festival will now not go ahead.

Around three weeks ago the company, which received £230,000 for 2011/12, discovered financial issues that, its directors felt, left it with no choice but to wind up.

A letter sent to shocked creditors and artists says trading ceased from November 30 because "the company has suffered cashflow difficulties due to irregularities, which are currently being investigated, and there is no possibility of any further capital being injected to refinance the company."

The cancellation of the festival leaves between 40 and 50 artists without their planned performances in Glasgow next year.

The company has informed creditors and artists that it has "little or no realisable assets and as such there are insufficient funds available to meet the costs of a formal liquidation.

"In these circumstances, unfortunately, the company is unable to meet the outstanding balance due to you and the company will be struck off in due course."

It is understood the directors of the company and artistic director and chief executive Nikki Milican are currently gathering information to give to police which will result in a formal investigation.

Anna Stapleton, administrative director of the Citizens Theatre and one of NMI's directors, confirmed the company had ceased trading and was now investigating the financial irregularities, while continuing to support Ms Milican.

She said she hoped the lauded work of the artistic director –who was awarded an OBE in 2009 – would continue in the future in another form, and added: "I must place on record our admiration for Nikki Milican and all that she has done. From the director's point of view we had no option but to take the decision we did. I think the cancellation of the festival is a great loss to the arts in Scotland. In due course, hopefully a phoenix will arise from this."

Ms Stapleton said the circumstances were "very difficult" for Ms Milican, and all the board could do now was support her.

She said she could not confirm any more details of the circumstances surrounding the closure of the company as there is likely to be a police investigation. She did confirm that a police force – not Strathclyde Police – had been informed of developments.

New Moves International was one of the 60 "Flexible Funded" organisations of Creative Scotland, supported with £230,000 for 2011/12.

A spokeswoman for Creative Scotland said: "The board of NMI has advised us of the regrettable news that it has ceased trading.

"New Territories has, for many years, offered exceptional experiences for audiences and offered a platform for artists to develop their careers. Naturally, we are disappointed to learn there will not be a further festival, given the high quality of international and UK artists involved.

"The exact circumstances of NMI's closure are still being investigated by its board, however they will continue to keep Creative Scotland informed. Until the NMI's board has completed its investigation we have nothing further to add."

A statement from Glasgow City Council, said: "We are aware of the situation surrounding the 2012 New Moves festival and will follow developments closely."

Mary Brennan, dance critic for The Herald, who has reviewed New Territories for many years, added: "If you include its beginnings in the National Review of Live Art, it has been going for 30 years and in many venues.

"The influence of the festival has been incalculable, and even though it has always been a little bit under the radar of what is considered successful and commercial, it has inspired so many."

For years the festival has shown Scottish audiences cutting-edge live art and performance art from across the world.

It has been credited with inspiring Scottish artists in innovative forms of performance, as well as bringing hundreds of international performers to Glasgow, Edinburgh and Aberdeen.