Former federal education minister John Dawkins has quit as chairman of training group Vocation after a government inquiry into its services.
His departure comes just weeks after a Victorian government review found some students were enrolled in inappropriate and low quality courses.
The news coincided with the launch of legal action against Vocation by a shareholder, who claims the company has misled investors.
Mr Dawkins' departure also follows a sharp plunge in Vocation's share price which has wiped about $625 million off its market value since September.
But while the former Labor minister will leave the chairman's role, he has been hired as a consultant.
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His replacement will be Doug Halley, chairman of energy infrastructure investor DUET Group.
Mr Dawkins said he considered shareholder calls for Vocation's board to be renewed before making his decision to step down, after just under a year in the job.
"My decision also took into account the views of those shareholders who believe that the company should retain my knowledge and relationships with the industry, its regulators and funding bodies," he said in a statement on Thursday.
"I have therefore agreed to continue to support and advise the board and management in a consulting role."
Vocation lost about $20 million in government funding as a result of the review of its training programs, and faces a hit to its earnings of $5 million.
Shareholders were reportedly considering launching a class action against Vocation following the review's findings.
One of Vocation's investors, John Webster, has launched legal action in Victoria's Supreme Court against Vocation.
He claims the company's prospectus, issued before its stock market float in December 2013, was misleading and deceptive.
Mr Webster also accuses Vocation of breaching ASX rules by failing to disclose certain matters in relation to the Victorian government review.
Vocation denies the claims, saying they "lack proper foundation", and says it will vigorously defend itself in court.
Vocation's shares, which have plunged from a peak of $3.35 in September, dropped 9.5 cents, or 15 per cent, to 53.5 cents on Thursday.
The appointment of Mr Dawkins as chairman in December 2013 sparked controversy because he was heading two industry councils that provided advice to governments.
At the time, he chaired the National Skills Standards Council and the Australian Qualifications Framework Council.
Vocation is one of Australia's largest vocational training and higher education providers for the health, manufacturing, trades, aged care, business and tourism sectors.
