Five board members at Capricorn Energy including chief executive Simon Thomson have resigned with immediate effect and two more will follow as the group announced it will postpone the vote on its controversial merger with Isreal's NewMed Energy.

The move comes after weeks of mounting shareholder pressure led by activist investor Palliser Capital, one of Edinburgh-based Capricorn's biggest shareholders. The hedge fund, which claimed to have support from investors controlling roughly 40 per cent of Capricorn's issued share capital, had accused the board of "brazen disregard" in its pursuit of the NewMed deal.

The battle was set to come to a head on February 1 when shareholders were due to vote both on the merger and on proposals from Palliser to remove seven of Capricorn's nine directors and replace them with Palliser's own nominees.

READ MORE: Palliser turns up the heat on Capricorn Energy

The vote on the merger - which would have taken place first, followed by the vote on the board of directors in the afternoon - has now been postponed to February 22. The meeting called by Palliser will go ahead on February 1.

Mr Thomson, chairman Nicoletta Giadrossi, Peter Kallos, Alison Wood and Luis Arauju have all resigned with immediate effect. Non-executive Keith Lough and chief financial officer James Smith will remain in the short-term, though both will step down before the requisitioned meeting on February 1.

"Capricorn has today accepted that Palliser's proposals have won the argument with shareholders and are making the changes," Stifel analyst Chris Wheaton said in a note to investors.