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Under the proposal, shareholders will retain their existing holdings in Absolute Capital and will receive an equivalent number of shares in a new entity that will own the Argo businesses. Application will be made for shares in the new company to be admitted to Aim within six months of the share distribution.

The company said by separating the companies, both would be able to better achieve their goals without hampering one another.

In a statement, the board of Absolute Capital said: "The previous strategy of combining the two operations is no longer in shareholders’ interests."

The board stated it would be better able to execute its growth strategies – attracting funds under management and maintaining management teams – by creating independent asset management firms.

The announcement follows a difficult period for Absolute Capital, which saw the group's shares fall 70 per cent in one day in September when chief executive Florian Homm resigned. The firm then suspended investor exits from a number of equity funds in the face of heavy redemption demands.

Since September, Absolute Capital has been in the process of damage control and has been focused on stabilising operations and implementing changes to management personnel, investment management and risk policies. The group said it planned to focus on its core expertise of managing European long/short equity funds through research-driven trading strategies.