Under the proposal, an injection of £750m of new money would be provided to the company, offering it sufficient liquidity to trade over the winter 2019/20 season and "invest in the business for the future".
"We are committed investors, with a proven track record of turning around iconic brands including Club Med and Wolverhampton Wanderers FC", Hong Kong-listed Fosun, which already owns an 18 per cent stake in Thomas Cook, told Reuters.
The Shanghai-based Fosun Group conglomerate has been on a buying spree in recent years, and taking control of Thomas Cook would significantly expand its business in Europe.
"This comes at a cost, with a significant dilution for existing shareholders", Chief Executive Peter Fankhauser said, adding it was a "pragmatic and responsible solution to secure the future of the Thomas Cook business and brand".
He added: "After evaluating a broad range of options to reduce our debt and to put our finances onto a more sustainable footing, the Board has chose to move forward with a plan to recapitalise the business, supported by a substantial injection of new money from our long-standing shareholder, Fosun, and our core lending banks".
Other tour operators are also facing challenges and in May Anglo-German rival TUI reported deeper first-half losses due to airline overcapacity for Spain and the grounding of its Boeing 737 MAX planes.
The proposal also envisaged a significant amount of the company's external bank and bond debt being converted into equity, to be agreed following discussions with financial creditors.
The 178-year-old London-listed company, worth roughly $4 billion after it debuted in June 2007, now has a market value of about $255m and has seen its stock more than halve in value so far this year.
The British holiday company's tour business had 11 million customers in 2018 and produced £7.4 billion in revenue.
The company said that since announcing a review of its airline business in February, the operating environment in the European travel market had become progressively more challenging.
It is one of China's so-called "grey rhino" companies - along with Wanda, HNA and Anbang - that have come under growing scrutiny in the last few years from mainland authorities wanting to crack down on debt-fuelled foreign acquisitions.
"Whilst this has always been seen as the likely route out of the mire for Thomas Cook, there are several questions remaining, for instance, how would this deal impact the proposed airline sale?"
The troubled travel operator says it is in "advanced discussions" about a possible £750 million cash injection by Chinese investment firm Fosun.