Ospreys chairman Mike James has resigned over their proposed merger with Scarlets, and has accused the Welsh Rugby Union (WRU) of "catastrophic mismanagement".
The WRU is attempting to overhaul the game, and are keen to introduce a region in north Wales, which could lead to a merger between Ospreys and Scarlets.
The Professional Rugby Board (PRB), which comprises representatives of the WRU, Ospreys, Scarlets, Dragons and Cardiff Blues, met to discuss the proposals on Tuesday.
However, at the beginning of the meeting, James tendered his resignation, before adding: "None of us doubt that regional rugby requires restructuring in order to ensure the long-term sustainability of the game.
"The way in which this has been handled however is nothing short of chaotic, resulting in a fatal combination of uncertainty, conjecture and insecurity now hanging over regional rugby's future.
"To methodically, rationally and impartially map out the future of regional rugby is one thing, to fatally wound it with an ill-judged, cavalier process is another.
"We now have the worst of all worlds - a lack of clarity, a lack of transparency and a total inability to plan ahead. We can no longer make sound rugby or business decisions and nor can our players or commercial partners."
No final decision on the WRU's plans - dubbed "Project Reset" - has been made, but the new region could be operational next season if it is given the go-ahead by the PRB.
Sky Sports News understands players from both regions were informed about the potential merger on Monday, and Scarlets hooker Ken Owens has said: "As the chairman of the WRPA (Welsh Rugby Players Association) I am deeply concerned about the situation that the players across the four regions face.
"I recognise that this is the most challenging situation that I or arguably any player has faced during our rugby careers. I appeal to all stakeholders to have the concerns and welfare needs of all those that stand to be affected by the proposed changes at the forefront of their minds.
"It's also clear players need to be represented on the PRB because they can and must be part of the solution. Without them there is no Welsh Rugby."
James will be succeeded as Ospreys chairman by Rob Davies.