Sullivan is frustrated that the current board cannot complete the deal they shook hands on with Bruce after he had steered the club back into the Premier League.
Sullivan told the Birmingham Mail: "Because we are deemed to be in a takeover period - even though no bid has yet been made - we can't activate any material change to substantial contracts at the club.
"It seems mad that we can't give the manager a new contract, even though it's slightly different, not hugely different, to his present one, without the permission of a potential buyer.
"We asked Mr Yeung to agree to the contract we have put to the manager but he said 'no', he doesn't want to change anything at the moment.
"Basically, he wants to keep his options open. His decision does not mean that he will get rid of the manager when - or if - he completes a takeover.
"Steve does still have 20 months left, but it's not a good situation. I think it undermines the manager's confidence. It's like saying I might sack you, I might not. It's almost like getting the dreaded vote of confidence."
Sullivan added: "I have written to Mr Yeung to say that this really does have to be resolved or he has to accept that his decision is likely to be detrimental to the dressing room and team performance, as well as leave the manager unsure.
"What you have got to have at a club is stability and, frankly, I am amazed that Mr Yeung and the Chinese cannot see the consequences of this at such a vital time of the season."