Founder Melissa Johnson was hit with a lawsuit for infringement and unfair competition shortly after she established her organisation in 2008, six years after the Thriller superstar's own charity, also named the Heal the World Foundation, shut down.
Estate executors argued the new company had no real link to Jackson, even though the superstar's mother, Katherine, had agreed to work with Johnson and encouraged Michael's three children to get involved.
But the two parties have now worked out a deal following a meeting on Monday, April 18 between estate lawyer Howard Weitzman and Katherine Jackson's legal advisor, Perry Sanders.
According to TMZ.com, Johnson has been granted permission to use the late singer's name and image in association with the charity, while Katherine has been made a member of the board of directors to oversee the foundation's work.
The lawsuit is expected to be formally dismissed in court on Tuesday, April 19.