The "Gen Closing Requirement" switch on the ATS panel is used to prohibit the ATS from closing in situations where too few sets taking load may cause problems such as overload.
This switch is designed to work with the number of sets in the system. For a 2 set system for example, it will have the options of 1, 2 and AV (short for available).
When set at AV, when all the sets that are able to come available come onto the BUS are available, the ATS will change over.
When set at 2, when both sets are available on the BUS, the ATS will change over. If only one set is able to come onto the BUS then the ATS will not change over.
When set at 1, as long as one set comes onto the BUS, then when it is available, the ATS will change over.
It is generally suggested you set it at AV for most systems, as you probably want the ATS to try and take the load, even when one set has failed to join the BUS. Furthermore, good system design would mean a single failure should not mean failure of the whole system, so the sets should have been sized with this in mind.