Disgruntled investors in three Aurora listed funds have failed in their bid to replace the responsible entity after the fund management firm issued more shares ahead of the unitholder vote.

In a highly unusual extraordinary general meeting held at the Police and Justice Museum in Sydney, motions to replace Aurora in its role overseeing the management of two funds – The Aurora Property Buy Write Fund and the Aurora Global Income Fund – were defeated after the share registers were expanded by 13.3 per cent and 44.7 per cent.

The issue of additional shares appeared to increase the amount of votes required to remove Aurora as the responsible entity of the funds.

The official disclosures of the share issues were lodged as the meetings commenced, in what Aurora’s legal adviser said was an “oversight”.

The RE is a legally appointed entity of a managed fund that acts in the interests of unitholders in providing oversight of the manager that provides the service of managing their money.

However potential conflicts arise when the fund manager and the RE are the same entity, as is the case with Aurora.

In a third meeting to replace Aurora as the RE of the Hastings High Yield fund, the motion was narrowly defeated with 33.9 per cent of proxies voting against the proposal versus 31.4 per cent voting for the proposal.

Legal representative of Wilson Asset Management, a unitholder in the three funds which called the meeting, raised concerns about the validity of online proxy votes which accounted for 13 per cent of the votes cast with the issue to be resolved next week when the meeting reconvenes.

WAM chairman Geoff Wilson said he was “disappointed” in the actions of Aurora.

“By issuing units to related entities, they have changed the outcome of the vote,” he said.

John Patton, the owner of Aurora, denied suggestions that he was acting against unitholders’ interests by issuing shares that were purchased by an unlisted Aurora fund and another listed company, Keybridge, of which he has since been appointed chairman.

Keybridge’s largest shareholder is Nicholas Bolton, the well known corporate raider who is serving a three-year suspension from managing companies. The second- largest shareholder is Bentley Capital, which is controlled by Farooq Khan.

Mr Patton was also reluctant to provide a “yes” or “no” answer when WAM’s Mr Wilson asked whether Mr Bolton was a funder of Mr Patton’s Seventh Orion company, which acquired the Aurora Funds Management group from Keybridge.

A shareholder of Keybridge has also publicly questioned whether the company is paying consulting fees to Mr Bolton and paying his legal fees – an issue that has yet to be resolved.

Mr Patton told The Australian Financial Review that as chairman he was not involved in any investment decisions made by Keybridge including its decision to purchase shares in the Aurora Funds.

He said the decision made by Aurora to invest in the related funds was a means of deploying idle cash in the managed fund as it awaited redemptions, and that the board had determined the strategy before Wilson had bought units in the fund.

Efforts of unitholders to replace Aurora as the RE of another fund, the Aurora Absolute Return fund was also defeated in October after additional shares were issued. On Tuesday, it emerged that the fund has bought back $2.2 million of shares.

It also emerged at the meeting that after the departure of experienced fund manager Hugh Dive, 28-year old Victor Scilliano a former Keybridge employee was overseeing the five Aurora investment strategies including the global dividend fund and the property and derivative fund.

He had also assumed some responsibilities for the Hastings High Yield Fund, which are being officially overseen by William Johnson, a non-executive director of Keybridge that was nominated by by Mr Khan’s Bentley Capital.

Mr Patton said he would consult with the company secretary when asked who was the appointed responsible officer for the funds.

Financial planner Christopher Hall whose clients invest in the Aurora property fund described the situation as a “terrible Shakespearean drama”.

“It’s disappointing to see such great products run so poorly and not in the interest of investors.”