It has emerged that the Edinburgh College of Art (ECA) is on the brink of collapse as details have surfaced of its precarious financial state.

Documents obtained by the Sunday Herald regarding the ongoing merger talks between ECA and the University of Edinburgh have revealed a collection of financial difficulties facing the College.

ECA reportedly has debts of £9 million and required an extra £1.6million from the Scottish Government to stay afloat.

The documents reveal that the College may have broken covenants with regard to an £11.5million loan obtained from Lloyds Bank, which financed the purchase of Evolution House, ECA’s newest building, in 2006. ECA has spent £21million in total on the New Town property, but it is now only estimated to be worth £10.6million.

The documents also reveal that the College may have broken the law in 2008 by obtaining a £1.5million loan from its own student scholarship fund.

The reports state: "Although the trustees sought legal advice on this, the University’s own legal advice suggests that it is not clear that the trustees were working within the law making this loan."

The amount withdrawn from the Andrew Grant Scholarship Fund amounted to half of the total fund allocation. It used to provide bursaries, loans and travel expense compensation for students.

Moreover, the College was not able to name all the bank accounts it holds, nor whether it had overdraft facilities. It was also unable to disclose a list of its current debtors and creditors.

ECA and the University are at advanced stages of merger discussions after the governing boards of both institutions passed merger proposals. A consultation process is currently underway with the Scottish Funding Council and the Scottish Government, who both must agree to the merger.

Though the board of the College passed the proposals in September by a margin of eleven for and three against, there has been much upset over the plans. It has been confirmed that four members of the board have since resigned.

Lady Mathewson, one of the four who resigned, has voiced her disapproval at the manner in which the merger discussions were conducted. In her resignation letter she said: " I am appalled at the gratuitous, cavalier manner in which the Scottish Funding Council, the ECA principal, the chairman and the University authorities are able to run roughshod over due legal procedure and process."

In response to the resignations, a spokesperson for ECA told the press: "While individual governors are entitled to disagree with the decision to merge, the suggestion that there has been a failure to explore the options or to ensure transparency in the process is entirely untrue."

Leading alumni of the College have also expressed their alarm at the proposals. Dr Barbara Rae, chairwoman of the Alumni’s Association Council has repeatedly stressed her fears that distinctive identity of ECA is at risk.

It is not known what the ECA Students Association’s response to the recently published reports is, nor is it clear what type of consultation is presently occurring with students.

A student consultation meeting was held last Thursday regarding the merger, but was closed to the press.

Francesca Miller, president of the Students Association, was not available for comment as to the outcome of the meeting.

Scottish education Secretary Michael Russell will decide on the merger in January.