THE board of Golden Vale is believed to have been sharply divided on the proposal to remove the managing director, Mr Jim O'Mahony, with the vote understood to have been carried by a majority of one.

While the company has refused to disclose details of the outcome, industry sources have indicated the proposal was carried by eight votes to seven, with almost half of the directors supporting Mr O'Mahony.

Speaking to The Irish Times yesterday, Mr O'Mahony said he was now taking legal advice on his dismissal. "I am proud of what I have achieved in Golden Vale over the past 10 years and I am confident that this will be fully justified at the appropriate time and place," he added.

The board voted by secret ballot on Thursday on a proposal to remove Mr O'Mahony as chief executive. The move follows the recent controversy over the payment of £3.1 million in milk super levy arrears to the Department of Agriculture following an investigation of its business.

The Department of Agriculture yesterday confirmed that its investigation into the company is continuing. A spokesman said the EU Commission has been kept informed of its investigation which is concentrating on breaches of EU regulations relating to milk quotas the superlevy and national regulations.

All 15 Golden Vale non executive directors, 14 of whom are farmers participated in Thursday's vote. The company's two executive directors Mr O'Mahony and the finance director, Mr Liam Irvine, were asked to absent themselves from the proceedings.

It is understood the board asked Mr O'Mahony to offer his resignation at the meeting but he refused.

After the vote Golden Vale announced his removal as managing director with immediate effect. In a short statement it said the board had appointed Mr Irvine as acting managing director and would begin its search for a new managing director.

One source said the decision followed a "gradual erosion" of the board's confidence in its managing director. The board is known to have become increasingly concerned about the group's ability to recoup the £1.3 million superlevy payment from its milk suppliers.

The announcement came too late to make any impact on Golden Vale's share price on Thursday. Despite recent developments, the share price has made progress over the past week and yesterday gained a further 3p to close at 70p.

The board's decision to remove Mr O'Mahony is seen as an effort by the company to regain the confidence of its big Irish institutional investors, most of whom have recently sold Golden Vale shares heavily.

Analysts yesterday expressed concern at the deep divisions within the board in relation to Mr O'Mahony's position. One suggested that this will clearly influence the group's ability to reduce its milk prices a Lower prices to farmers are seen as necessary to protect its profit margins in the domestic market.

Analysts have been revising their profit forecasts for the group this week, with most expected to cut their 1996 forecasts from around £17 million to £12 million or less.

Mr O'Mahony successfully fought off a challenge to his position two weeks ago at a meeting of the Golden Vale Co-op. A no confidence motion was proposed by the former Golden Vale chairman, Mr Dennis Wallis. A supporter of Mr O'Mahony subsequently proposed a confidence motion which was passed.

Mr O'Mahony and Mr Wallis were understood to have differing views on some of the changes implemented at the company in recent years. Around half of the group's shares are held by farmers.