Sino-Forest Corp has asked a Canadian bankruptcy court to approve an agreement providing for either the sale of the embattled Chinese forestry company to a third party, or a restructuring enabling note holders to acquire nearly all of its assets.

The Toronto-listed company, whose stock fell more than 70 percent after a short-seller accused it of exaggerating its assets in June, said on Friday it would ask the Ontario Superior Court of Justice to approve the agreement. Regulators stopped trading in the stock in August and it has yet to resume.

Sino-Forest said in a statement that holders of about 40 percent of the aggregate principal amount of its notes have agreed to support the plan.

The company said it was also taking legal action against the Carson Block, the short-seller's firm Muddy Waters, and others, seeking more than $4 billion in damages.

We believe the full value of our assets will only be achieved if we are able to continue operating the business, Judson Martin, chief executive of Sino-Forest, said in the release.

It said a restructuring under Canada's Companies' Creditors Arrangement Act, the equivalent of U.S. Chapter 11 filing, was the best way to secure the business's future.

(Reporting by Allison Martell and Jennifer Kwan; Editing by Frank McGurty)