The takeover Panel told rebel shareholders in the £824m Caledonia Investments company to put up or shut up in its attempts to break up the trust.

The regulator stepped in ahead of an extraordinary general meeting (EGM) that is being held today of the Cayzer Trust, the family company that controls Caledonia. It has told the Cayzer family members that are demanding a shake-up of the Caledonia fund to turn their restructuring proposals into a formal offer by 17 October or withdraw for at least six months.

A bitter row between Sir John Craven, a veteran City banker and member of the Cayzer Trust, and Peter Buckley, the chairman of the Cayzer Trust and Caledonia, has been going on for months.

Sir John and his allies want to use two Guernsey companies to break up Caledonia in a two-year process. Investors that want to end their holding of the trust would take shares in a company called Caledonia Realisation. Those that wanted to reinvest their liquidation proceeds through the company would be able to take shares in Caledonia Continuation.

The move to disband Caledonia has implications for other City companies, as the company is an 18 per cent shareholder in Close Brothers and 12 per cent shareholder in Rathbone Brothers.

But despite the dissent, the Cayzer Trust shareholders are today expected to back Mr Buckley in retaining the status quo for the Caledonia Trust.

Tim Ingram, the chief executive of Caledonia, yesterday welcomed the move from the Takeover Panel, saying it would help draw a line under the "negative campaign" that had been waged against Caledonia. The dissenting shareholders last week challenged Caledonia over its performance record, saying it had delivered erratic returns and was invested in high-risk stocks.

They are backed by the fund managers Hermes and Schroders, and have said they are prepared to modify their proposals.