Current owner Carson Yeung, through his company Grandtop Holdings, bought the club for a reported ¦pound;81.5million.
Yeung initially called in the West Midlands Police economic crime team over alleged "financial irregularities" at the club, although any criminal investigation was ruled out.
"Birmingham City Football Club can confirm that a settlement agreement has been reached between themselves and the previous owners for an undisclosed figure," read a statement on the club's official website.
"The club shall cease the civil suit it had instituted and all related actions regarding this.
"As fellow members of the Premier League, both parties agree that this is a good settlement to ensure our continued friendship.
"The club will make no further comment regarding this matter."
Source: PA
