Charles Green has nevertheless completed the purchase of Rangers' assets in a deal worth £5.5m.
In a press conference at Ibrox, Mr Green offered to make Mr Smith the club's new chairman.
He also said he wants Ally McCoist to continue as club manager, but said he had not spoken to McCoist about it.
Rangers is to enter liquidation after creditors refused a deal to allow it to emerge from administration.
BBC Scotland understands Mr Smith's bid is worth £6m, which is half-a-million pounds more than Mr Green's group paid for the club's assets.
Mr Green said in a statement: ....
"The transfer of the business and assets to a new company structure has taken effect immediately and the new company is The Rangers Football Club.
"An application has already been made by the company to register with the Scottish Football Association and to participate in the SPL."
The Rangers Supporters Trust has urged fans not to renew season tickets in a bid to put pressure on Mr Green to sell to Mr Smith's consortium.A statement from the Trust said Mr Smith's bid was the only one that would ensure the Rangers family stayed united.
More about the "drama":
So what about the new company that controls Rangers' assets? The four investors named by Charles Green today don't include the two he named in May. And one of the four, Ian Hart, has already said he supports the bid launched earlier today by Walter Smith.
Charles Green has repeated his pledge that no one shareholder should have more than 10% of shares.
Indeed, there are heavy hints that ownership will be further diluted by flotation of the new company, to raise money from new investors. Those now on the board bring with them experience of such floats, and Charles Green was taking the opportunity to invite others to write a cheque.
The others he was specifically talking about were in the consortium led by Walter Smith. The former manager spoiled Charles Green's party with an intervention which, on the surface, looked extremely naive - asking Green to step aside when it was already clear the administrators would sell to him, and within minutes.
But it may not have been quite so naive. The bid was preceded this morning by a newspaper story that manager Ally McCoist was ready to quit, believing he can't work with Charles Green.
Headed by Walter Smith, a mentor to McCoist, the statement named two supporters; Douglas Park, the motor industry magnate who is among Rangers' richest supporters, and Jim McColl, who is not a noted Rangers supporter, but is one of Scotland's richest and most successful businessmen.
The big Rangers' supporters groups followed up on Walter Smith's intervention with statements backing it, urging Charles Green to step aside, and advising fans not to buy season tickets until "the situation is resolved".
The fans know they have a powerful lever over Charles Green, as there's no evidence he has the working capital he needs to run the club.
Season ticket income looks vital if he's to avoid pitching the club back into administration. So Charles Green now has control of the assets, but faces hostility from his customers.
That's not a good place to be. The Walter & Co consortium is reported to be offering £6m for the assets. That would be a £500,000 profit on the price that's been paid today.
Not bad for a day's work, except that there were costs involved in putting the bid together. Charles Green's team reckons the total bill so far - including the fee paid to the administrators - is £10m.
That looks like the starting point for a negotiation.
But if Walter & Co get what they want for, say, the mid-point of £8m, what then? The former manager's statement gave very little indication of how his people would run the club, except to say they don't want to.
"This is an acquisition designed to stabilise the club and ensure history does not repeat itself," said the former manager.
"We are not in this to take money out of the club, but more so to do whatever it takes in a turnaround plan to ensure within a few years the club can be passed on in tact and to the right people".
More surprisingly, as for the old Rangers Football Club plc:
It could take up to 10 weeks for a formal handover to liquidators.
One reason for that might be that, while it remains a legal entity, the plc has membership of the Scottish Premier League. So the administrators should be able to use the club's vote when it comes to the vital decisions on how Rangers is to be punished for its financial wrongdoing.
... the focus is now on the financial rules of football. And they're no less complex.
... a great deal comes back to Sky and ESPN, the broadcasters.
Last November, they signed a deal worth £80m for five years of the rights to broadcast SPL matches. The contract included a clause that allows it to withdraw if the Old Firm teams are no longer in the SPL.....
(This post was edited by rainjar on Jun 15, 2012, 12:50 AM)