The board of beleaguered Northern Rock will attempt to fight off demands from shareholders for a greater say in the firm's future at an extraordinary meeting this week.

With nationalisation of the bank believed to be imminent, thousands of investors are expected at Newcastle's Metro Radio Arena tomorrow to vote on proposals which Northern Rock's chairman Bryan Sanderson has described as "potentially damaging".

Hedge funds SRM Global and RAB Capital, which together own about 18 per cent of the lender, want to limit the board's ability to sell assets and issue new shares without special shareholder approval.

The duo say they are looking to protect shareholders' rights, although the board - which is urging investors to vote against - have said the measures could tie their hands over engineering a rescue of the stricken bank.

The Pensions Investment Research Consultant pension fund adviser has said shareholders to abstain on the motions, as it believes they are a "restraint on the board's powers to act in the best interest of all shareholders".

Limiting the board's ability to issue new shares would also have a bearing on two private sector rescue bids on the table from a Virgin-led team and the Olivant investment group, as both involve rights issues.

The hedge funds are likely to have support from Swedish pension fund AP2 - giving them at least 20 per cent of the vote - with more support likely to come from other private investors who own around 25 per cent of shares.

The lender has 100,000 smaller investors and the Northern Rock Small Shareholders Group head Robin Ashby has said he plans to support the proposals.

Northern Rock was at the centre of the UK's first bank run in nearly 150 years in September after soaring borrowing costs in the credit crunch.

It has borrowed an estimated £26 billion in emergency funding from the Bank of England so far, although it sold more than £2 billion worth of mortgages to JP Morgan - the US investment bank which has just hired former prime minister Tony Blair - to ease its burden.

Whatever the outcome of the meeting, the huge extent of Northern Rock's borrowings means the Government will have the final say over the future of the bank.

But according to SRM and RAB - which both bought into the mortgage lender after the Bank's emergency funding bail-out was announced - Northern Rock is a "strong and viable" business. Despite the manoeuvring of the hedge funds, nationalisation or administration looms if a private-sector solution cannot be found - leaving shareholders with nothing.

Chancellor Alistair Darling told MPs last week that Government guarantees were in place to protect savers, not shareholders.

The Treasury was reported yesterday to have lined up City heavyweight Ron Sandler to chair Northern Rock in the event of it being nationalised.

Tory leader David Cameron, however, said yeserday that nationalisation would mark a "complete failure" for the Government.

He criticised ministers for not looking more seriously at an approach by Lloyds TSB for Northern Rock before the run on the bank began. He also blamed the Government's planning for an early general election for not making a speedy decision.