Two institutional shareholders owning more than 15 per cent of shares in the troubled music promoter Sanctuary Group have warned its chief executive, Andy Taylor, that he is "on probation".
One of the shareholders said that he would be seeking firm assurances after Friday's annual general meeting that Mr Taylor is no longer in overall control of the company, whose artists include Morrissey and Iron Maiden.
Earlier this year, the company had to raise £110m in a rescue rights issue as part of a restructuring after losses jumped from £26m to £142m last year.
The shareholder said that the company had already told some investors that the new non-executive chairman, former British Airways chief executive Bob Ayling, and the new finance director, James Wallace, would take charge.
The institutional shareholder, who declined to be named, said: "Andy Taylor no longer has control over decision making. The finance director says he has final veto over decisions. The finance director and chairman are in charge."
Mr Taylor, who was executive chairman of the company until the restructuring, would be on probation over the next 12 months, he added. And if trading did not improve, he would be asked to step down. "Shareholders may have to get tougher if things get difficult next time round."
The other institutional shareholder agreed that Mr Taylor, who co-founded Sanctuary in 1976, would not survive a repeat of the company's recent troubles. But he stressed that Mr Taylor was responsible for building up the business and for continuing to generate the company's revenues because of his contacts within the music industry. "It's important for the company to maintain these relationships. It would be easy for artists to say 'I do not want to work with you'."
Neither shareholder said he would vote against the board's re-election at this week's shareholder meeting.
A spokesman for Sanctuary Group said: "We have restructured and strengthened the board so shareholders, who have recently supported the successful refinancing, are able to see that the new board structure provides the additional controls, governance and guidance that should allow the group to develop an improved performance."
Analysts blame Sanctuary's woes on over-ambitious global expansion, epitomised by the acquisition in 2003 of Music World Entertainment, the US urban music management company owned by Mathew Knowles, father of pop diva Beyoncé.Reuse content