One of Thailand’s most popular opposition parties has been disbanded after it was found to have violated electoral rules by receiving an illegal loan, a decision analysts say is likely to heighten political tensions.

The constitutional court dissolved Future Forward on Friday and banned 16 of its leaders from politics for 10 years.

Future Forward, which has criticised the Thai army’s influence over politics, was founded less than two years ago but has rapidly emerged as a prominent opposition voice, gaining more than 6m votes during an election last year.

Future Forward’s anti-establishment message, and its charismatic leader, the billionaire Thanathorn Juangroongruangkit, appealed especially to younger voters. But the party has been dogged by legal charges, which it says are politically motivated.

On Friday, the court ruled the party had violated election rules by taking a 191.2m baht (£4.7m) loan from Thanathorn. The law limits donations from an individual to 10m baht. Thanathorn denies any wrongdoing, and some political commentators say other parties’ finances have not been scrutinised in the same way.

The decision will strengthen the parliamentary strength of a coalition led by Prayuth Chan-ocha. The prime minister, who initially took power in a military coup in 2014, was reinstated as leader during a process critics said was rigged in favour of the army.

Thanathorn, who was suspended from parliament in November over separate allegations, said in a comment on Facebook: “Why do we face a party dissolution, a ban on executives and even jail for wanting to build a new type of honest political party with good intentions and transparency?”

Future Forward has been hit with a series of legal charges, some of which carry a possible prison sentence, including sedition and an allegation the party broke public assembly law by organising a flash mob. Last month, the party was cleared of separate claims that it was seeking to overthrow the monarchy and had links to the Illuminati – a suggestion apparently based on the party’s symbol, an upside-down triangle.

Supporters of Future Forward react to a TV broadcast of the court verdict at the party’s headquarters in Bangkok. Photograph: Gemunu Amarasinghe/AP

Thitinan Pongsudhirak, an associate professor at Chulalongkorn University in Bangkok, said the decision to disband the party was “a critical setback for democratic development”.

“[Future Forward] was a party that stood against military-authoritarian rule and more importantly against the circular nature of Thai politics that has made the country stuck at a standstill for 15 years,” he said, adding that other parties had not been held to the same standards.

On Friday, an image that read “I am one of 6,330,617 people. Don’t kill our voice,” was shared widely on Twitter, referring to the number of people who voted for Future Forward last year, when it came third in the election.

“This will definitely heighten the political uneasiness in the country,” said Charles Santiago, a Malaysian MP and chair of the Asean Parliamentarians for Human Rights, an association of members of parliament from south-east Asian nations. “It’s going to create a sense of illegitimacy on the part of government and young people feeling they are being locked out of the system.”

Most of the party’s lawmakers will retain their seats and can form a new party, but the ban on its leaders will reduce the opposition’s votes and influence in parliament. The effective disenfranchisement of so many voters could prompt street protests, say analysts.

The decision comes at a time of growing concern over Thailand’s stagnating economy, the threat of coronavirus – which has dealt a major blow to the tourism sector as well as posing a challenge to public health – the country’s dangerous pollution levels, and drought.

“Thai people like [Future Forward] supporters will either have to rise up in their own way or they will have to put up with autocratic preferences that have resulted in early economic stagnation,” said Thitinan.

An initial request by Thailand’s election panel for the constitutional court to ban the party prompted thousands of people to take to the streets of Bangkok. A month later, thousands also gathered before dawn at a park in the capital to participate in what was described as an anti-government run – a show of defiance against Prayuth’s government.

“The established centres of power will likely become more repressive and autocratic,” said Thitinan. “What we don’t know is the level of determination and resolve of reformers who want a better Thailand.”