Sunley, an unquoted property and investment group that owns just over 10 per cent of Tay, says it has the backing of fund manager Phillips & Drew -Tay's largest shareholder which holds about 15 per cent. It also claims other institutional shareholders are equally dissatisfied with Tay's recent performance.
Shares in Tay Homes have collapsed over the past year, falling from 142.5p in March to close last week at 107.5p. Other shareholders include Fidelity, which owns about 10 per cent, and Foreign Colonial, which has a 7 per stake.
The dissident investors have accused the company of losing its way. They are unhappy about its high level of gearing, high overheads and low operating margin. They say the incumbent management has failed and that a new strategy is needed.
However, Tay has rejected previous calls by Sunley for a management overhaul, accusing it of trying to win control of a rival company without paying a premium. Tay said it has enough shareholder support to see off the rebel.
Sunley has criticised Tay's record during the recent slowdown in the North, focusing on its low returns in relation to other quoted housebuilders.
It has put forward four candidates for the board, including its joint chief executive, Richard Tice, as chief executive to replace John Swanson. Peter Hedges, a former director of the construction group Taylor Woodrow, has been put forward to take over from Tay's chairman Norman Stubbs.
It is also proposing Stewart Urry, a former managing director of Belgravia Property, for the post of finance director and Tim Walter, a former finance director of Five Oaks Investments, as a non-executive director.
Sunley has been building up its stake in Tay Homes since last summer when Trevor Spencer, who co-founded Tay with Mr Stubbs, retired, and Mr Stubbs was promoted from chief executive to chairman. Mr Swanson replaced Mr Stubbs as chief executive at the same time.
Sunley, which operates in the South-east, maintains it is not attempting any form of merger with Tay.