Update request blocking apps from working on macOS Catalina

Apple continues to change the collaboration criteria as new versions of Pages/Numbers/Keynote are released. Review that you meet the collaboration requirements. Some features may now require macOS Big Sur, and may block your use of Numbers v11.1 when attempting to do so.

Stop sharing a document

Open the document, then tap or click the Collaborate button  > Stop Sharing, then tap or click OK.

When you stop sharing, the document is removed from iCloud Drive for all participants. If you re-share the document later, the link will remain the same. If you set the document's Share Option to "Only people you invite," you will need to re-invite participants.

To stop sharing a document that is inside a shared folder, move the document outside of the shared folder.

After thought - if the Other Person(s) who is sharing the same document ( Numbers ) is editing the document on a Newer Version of Numbers - this issue will persist.

There is newer version of Numbers and are only available on newer versions of macOS like Big Sur and Monterey.

Though, judging from details of this machine - Catalina is as far up the macOS this computer can go :-((

It would appear all reasonable options, workarounds and solutions have been exhausted.

The limitation imposed for the functionality is really related to the age of the computer and not really a limitation imposed by Apple.

Yes, the machine maybe a well working machine for the purposes it is being used for, but the its' age is showing as it does not qualify for anything newer that Catalina

Have you tried to Dismiss the Notification for the update to Numbers ?