Nearly £7m in funding has been given to more than 60 artistic companies across Scotland in a major round of grants from the Scottish Arts Council.

However, several high-profile names were among the 43 groups that failed to gain two-year funding deals from the SAC, including theatre companies such as Suspect Culture, Theatre Workshop, Borderline and 7:84, as well as institutions including the Queens Hall and the Jazz and Blues Festival in Edinburgh and the Gallery of Modern Art in Glasgow.

Robert Rae, the artistic director of Theatre Workshop, said the funding process had been "unreasonable and unjust" and the Federation of Scottish Theatre said some theatre and dance companies were now facing possible closure.

Since 2006, the arts council has had three basic forms of funding - long-term foundation funding for major companies and institutions; one-off project funding and a two-year grant system called flexible funding, the latest round of which, for the years 2009-11, was revealed yesterday.

The SAC - due to be merged with Scottish Screen next year to form a new funding body, Creative Scotland - received more than 100 applications for its flexible funding pot, seeking a total sum worth £15m. However, it had just less than £7m to distribute and so only 63 of those applicants were successful.

Jim Tough, acting chief executive of the SAC, said much of the decision-making process had been hard but the new settlement would "allow artistic leadership to flourish and meets our original aim of responding to innovation, growth and new developments in the sector".