Regional Rugby Wales (RRW) has confirmed the four Welsh regions will not commit to extending the existing Participation Agreement with the Welsh Rugby Union (WRU) before Tuesday evening's deadline.
The move had been widely expected and deepens the rift between the two organisations.
The four regions - the Ospreys, Scarlets, Cardiff Blues and Newport Gwent Dragons - felt unable to sign for a further four years under the agreement, which, among other elements, governs the competitions the sides play in and international player release.
RRW claims the WRU's inability to confirm what competitions the regions will play in next season, with the futures of the Heineken Cup and RaboDirect Pro12 - as well as incomes resulting from those tournaments - yet to be decided, left them with little option.
A RRW statement read: "RRW, on behalf of the four Welsh Regions, confirms that the Regional businesses remain unable to commit to extend the existing Participation Agreement with the WRU by the deadline of 31st December 2013."
RRW has set a new deadline of January 31 for the issues to be resolved, although it warned the regions would be left with no option "but to pursue further competition options immediately".
With competition structures beyond the end of the current season as yet undecided, the regions stated that signing an extension would put £16million at risk as they would be unable to confirm matters such as income from ticket sales, sponsorship and TV rights.
The statement continued: "The WRU hold full responsibility under the Participation Agreement for the Competition platform and TV rights of the Regions and it is astonishing that they have put the four businesses in this position as a result of failing to fulfil their obligations under the agreement, despite having almost two years to resolve the issues involved.
"As it stands, the Regions do not believe the Participation Agreement reflects the changes and demands of the modern game."
RRW also re-affirmed its support for the Rugby Champions Cup; the alternative to the Heineken Cup proposed by the English clubs.
The WRU, on the other hand, has thrown its weight, along with the French, Irish, Scottish and Italian unions, behind European Rugby Cup and the continuation of the Heineken Cup.
RRW claims the Rugby Champions Cup would generate a guaranteed £12m additional funding across the four regions over the next three years.
But the umbrella organisation for the regions insists it still has a "strong desire" to work with the WRU.
The statement said: "It continues to be the absolute intent and strong desire of RRW and the Regions to work with the WRU in progressing such a positive position for the next five years of professional Rugby in Wales, or indeed to discuss any proposals WRU themselves may have that could provide an even stronger platform for sustainable and competitive professional rugby across Wales.
"Without change, professional rugby in Wales will fall further and further behind the rest of the European game."
Should a solution to the schism not be found then the WRU would be likely to cut the funding of the regions when the current agreement ends at the end of June, and could instead opt to field four different sides in the Pro12 and ERC's Heineken Cup.
The union could also look to offer central contracts to leading Welsh players who are out of contract at the end of the season such as Sam Warburton, Scott Williams, Adam Jones and Rhys Priestland.
The regions, meanwhile, would be expected to press ahead with plan to join the Aviva Premiership; reports have suggested they have been offered £4million each to create an Anglo-Welsh league.
However, such a competition would require the support of the WRU, the Rugby Football Union and International Rugby Board, which would appear unlikely to be forthcoming.