An escalating dispute between Gulf Keystone and a group of shareholders drove down the oil company's shares on Monday, 10 days ahead of crucial votes which will decide the composition of the board.
The company, which made its name finding a huge oil field in the Kurdistan region of Iraq, is facing investor calls for a board shake-up to counter concerns about corporate governance standards and executive pay.
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Its disagreement with activist investor M&G Recovery Fund, one of its biggest shareholders with a 5.1 percent stake, worsened on Saturday when the company recommended that shareholders vote against four directors M&G had nominated to the board, when the annual meeting is held on July 25.
Sky News then reported on Sunday that a shareholder group headed by M&G Investments was considering voting against Gulf Keystone's new chairman Simon Murray, a city heavyweight who was formerly chairman of commodities giant Glencore .
Shares in Gulf Keystone were down 10.6 percent in afternoon trade, underperforming the European oil and gas index which was 0.4 percent higher.
Setting out its objections to M&G's board nominees on Saturday, Gulf Keystone indicated that should Jeremy Asher, one of the four directors M&G has put forward, be appointed it could damage the company's operational team.
"There can be no assurances that the appointment of Mr. Asher will not result in key members of the executive and operational team choosing to resign," the company said, calling Asher's last spell on the board "highly disruptive".
Edison analyst Will Forbes, commenting about the share price drop, said of the dispute: "It's increased uncertainty. No one knows how this is going to play out. It's a concern that key members may leave the company."
Votes against new chairman Murray at the annual meeting will be a blow to Gulf Keystone, which appointed him in a bid to calm investor concerns over corporate governance.
M&G declined to comment on whether it was considering voting against Murray.
The investor met Murray on Friday to discuss corporate governance concerns and was angered when the company refused to disclose the new chairman's annual salary, Sky News said.
In a move which suggested, however, that Gulf Keystone was trying to mitigate some of the shareholder criticisms, a source familiar with the company told Reuters that Murray was planning to appoint third-party consultants to examine executive pay.
Gulf Keystone is considering appointing to the board Andrew Simon, who sits on the board of FTSE 100 building material supplier Travis Perkins and is former deputy chairman of energy services company Dalkia, the source also said.
(Additional reporting by Abhishek Takle in Bangalore; Editing by Pravin Char)