Shareholders in the music royalties investment fund Hipgnosis have voted overwhelmingly against continuing the business in its current form, throwing the future of the group into question.

At an extraordinary general meeting on Thursday, 83.2% of shareholders voted against Hipgnosis Songs Fund securing another five-year mandate to run as an investment trust.

That means the London-listed company, which offers investors the chance to make money from the royalties of tracks by artists such as Beyoncé and Neil Young, must rebuild its board and propose alternatives within the next six months or face a move to be wound up.

The EGM came immediately after the group’s annual general meeting, where investors voted against a $440m (£365m) sale of music catalogues. As a result, the deal agreed last month to sell 29 catalogues to a partnership between its investment adviser and funds advised by Blackstone will no longer proceed.

Its chair, Andrew Sutch, was also ousted, although he had previously announced his intention to resign by the group’s AGM next year. However, the decision was taken out of his hands as shareholders moved to remove him immediately.

Sylvia Coleman, a senior independent director, said: “The board and the investment adviser have each engaged widely with investors over recent months. While shareholders have not supported our proposed transaction or the continuation vote, it is clear that they share our belief in the inherent quality and potential of these assets.

“The directors are now expediting the appointment of a new chair who will drive the strategic review we have already announced, with a clear focus on delivering improved shareholder value.”

The day before Thursday’s AGM it was announced that Andrew Wilkinson and Paul Burger had resigned as non-executive directors of the group. This latest development comes as Hipgnosis scrapped plans earlier this month to pay a dividend after slashing the amount it expects to receive from royalty payments.

It said an independent valuer of its portfolio had “materially reduced” its assessment of industry-wide royalty payments after a decision last year by the US Copyright Royalty Board to recalculate the rate.

As a result, the valuer Citrin Cooperman cut the amount Hipgnosis Songs Fund can expect to receive in royalties from its roster, which also includes tracks by Blondie, Barry Manilow, Red Hot Chili Peppers and Shakira, played between 2018 and 2022 from $21.7m (£17.9m) to $9.9m.

The company said it could not afford to pay the interim dividend as it would put it at risk of breaching covenants relating to its revolving credit facility in place with lenders. Hipgnosis earns royalties every time one of the tens of thousands of songs to which it owns the rights is played.

The once high-flying company was founded in 2018 by Merck Mercuriadis, a former manager of acts including Elton John, Iron Maiden, Guns N’ Roses and Beyoncé, who is now an adviser to the business. Hipgnosis has spent billions of pounds buying catalogues in an effort to cash in on what it believed were assets undervalued in the streaming era.

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Before the AGM and EGM there had been questions as to whether Mercuriadis would continue in his advisory role but the Guardian understands his position remains unaffected by the votes.

In a statement, he said: “Our conversations with shareholders have revealed a consensus that they are enthusiastic about the quality of the company’s iconic portfolio of songs, however it is also clear that they are asking for change and we respect that feedback.

“Hipgnosis Song Management’s new management team and I have already started taking the relevant necessary action to meet the expectations of shareholders.

“Our commitment to the company’s shareholders remains absolute and we look forward to working with a new chair and reconstituted board during this period to ensure that the Hipgnosis Songs Fund delivers for its shareholders.