HSBC was embroiled in growing controversy last night over the fees that it charged for its involvement in a controversial restructuring plan at Hirco Developments, the AIM-listed property investment vehicle.

Laxey Partners, the activist investor that is leading a shareholder revolt at Hirco, said that HSBC had damaged its reputation by associating itself with a plan that it described as “astonishing” and “shoddy”.

Laxey has complained to the AIM regulation team at the London Stock Exchange about the lack of disclosure in a prospectus published by Hirco in the Christmas break. Laxey, co-founded by Colin Kingsnorth, also says that the £150,000-a-year in fees paid to Hirco's independent directors are too high.

HSBC is taking a share of a total of £4 million in fees for the proposed restructuring at Hirco, which is chaired by Niranjan Hiranandani, a member of the family that has made a fortune out of the development boom in India.

HSBC is Hirco's nominated adviser and said last night that it stood by its role on the restructuring. It emphasised the due diligence that had gone into the proposals. The bank has published a fairness opinion on the deal and said that it stuck by its view.

Laxey, which owns about 10 per cent of Hirco, is one of several investors opposed to a plan that would cede control of the company to the Hiranandani family. They plan to reverse their loss-making company into Hirco and take a stake of more than 50 per cent. Existing investors would be heavily diluted and lose their preferential claim on £350.8 million of shares that pay a 12 per cent annual dividend.

Laxey has already written to fellow investors in Hirco urging them to vote against the proposals. A vote will be held in Mumbai next week.

Banking sources dismissed suggestions that the plan was ill-conceived and that the prospectus was lacking in transparency.

Hirco listed on AIM in 2006 and raised more than £380 million to invest in property in India. Its shares have traded at a yawning discount to the net value of its assets.

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