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Plans for a privately-financed London University college in Malaysia are in danger of collapse over disagreements between the university authorities and the sponsors about the status of the new institution.

The first students were supposed to arrive at a new Kuala Lumpur college in 1997. But John Prebble, vice principal of Royal Holloway College, who with Michael McWilliam of the School of Oriental and African Studies is overseeing the negotiations, suggested this week that this is looking increasingly unlikely. He said: "Things are getting very tight because we have yet to hear back from the sponsors. Everything has gone very quiet."

The two main sponsors - the Malaysian firm YTL Corporation and the British firm John Laing International - want the institution to have full college status. Private education is highly competitive, and it is felt that only a fully-fledged college would be able to market itself successfully. This had been accepted by the two lead London colleges, Royal Holloway and SOAS, which incorporated the idea in their plan for the campus.

But in June, the university council rejected full college status, preferring instead an associate college status, an idea developed by Sir William Taylor, former principal of London University, in his 1992 Malaysian college feasibility study. In July, London's vice chancellor Andrew Rutherford and pro vice chancellor Sir Colin Dollery flew to Kuala Lumpur to save the deal. But, according to university spokesperson Barbara Anderson, they returned with several issues "unresolved".

Several top institutions have associate college status, including the London Business School.