A private school for children of Sweden's wealthy elite has been shut down following accusations that boys were burned with hot irons by older pupils.

The latest allegations about severe bullying at Lundsberg boarding school emerged at the weekend after one of the boys was taken to hospital and the police were informed. Nine boys were involved in the assault, police said.

Following a visit to the school in rural Värmland, in south-west Sweden, inspectors announced its immediate closure until measures are taken to prevent abuse.

The schools inspectorate said it had criticised Lundsberg on several occasions and repeatedly demanded that it take steps to address the problem.

The school, whose motto displayed prominently on its website is mens sana in corpore sano (a sound mind in a healthy body), has around 200 pupils, many of whom have wealthy parents working abroad but who want to send their children to a Swedish school.

Allegations of brutal bullying at Lundsberg first emerged in 2011 when pupils made anonymous phone calls to the media and the schools inspectorate alleging physical and sexual abuse. One pupil told Swedish television: "It's like Lord of the Flies."

Other former pupils have publicly defended the school and dismissed the allegations as motivated by social envy.

Lundsberg is one of only three boarding schools in Sweden. Established in 1896, it was explicitly modelled on England's elite public schools. The annual fee is around £20,000.

Under Sweden's system of free schools, which have served as a model for David Cameron's government, Lundsberg pupils receive money from the state to pay for their education, which is topped up by their parents.

The closure of Lundsberg is only the second time the schools inspectorate has ordered the immediate closure of an educational institution.

The Lundsberg director Sofia Orre said she was appalled by the decision. "The only thing I can say with such short notice is that it is a disaster for the students who attend the school and who are happy in school. This is devastating for the students," she told the Swedish news agency TT.

Petter Sandgren, a postdoctoral researcher at the European University Institute in Florence and a specialist on Swedish boarding schools, said that despite the allegations of bullying, Lundsberg could not be closed earlier because of the "old boys' network" surrounding it.

"Previously when the system of 'fagging' got too intense, it was resolved by the lawyers of the different families," Sandgren said. "This is the first time in the school's history that pupils have gone to the press. There is less loyalty to the school among its nouveau riche students."

Anita Sätereie, who worked in the kitchens at Lundsberg in the 1950s, said: "It's like time has stood still since I worked there – there is exactly the same spirit now as it was then, the school still lets the older pupils harass the younger ones and be cruel to them.

"I am so relieved that eyes have been opened and people see it for what it is. I never saw class society revealed so obviously as at Lundsberg – and it is still the same, like Upstairs Downstairs."

Lundsberg school did not answer the phone on Wednesday.