Durham have been relegated to Division Two of the County Championship – and lost their right to stage Test cricket.
Hampshire, relegated last season, have been reinstated to Division One by the England and Wales Cricket Board.
The move came after the county "accepted an offer of significant additional financial support from ECB in order to manage current and historic debt and revenue issues", according to cricket's governing body.
Durham will start next season in Division Two with a 48-point deduction. It has also lost the right to stage Test cricket.
A statement read: “ECB has been working with the Board and Chief Executive of the County and its stakeholders throughout 2016 in order to ensure that Durham could address their financial issues. This support has included advancing an annual fee payment of £1.294million. There has been no direct investment to date.
“The £3.8 million financial aid package – which has been approved by the ECB Board and accepted by the Board of Durham CCC – will allow the club to meet on-going salary, HMRC and operating costs, settle a substantial debt to a secured creditor and focus on the restructuring and future sustainability of the County Cricket Club.”
ECB Chief Executive Officer Tom Harrison said: “We’ve been working with Durham County Cricket Club throughout the year on how best to address their financial issues.
"We welcome the club’s willingness to review its business model and management structures.
“There is no doubt that a strong, financially robust Durham County Cricket Club has a vital role to play in developing England talent, enriching our domestic competitions and underpinning the wider growth of the game in the North East.
“The financial package and associated conditions approved by the ECB Board reflect the unprecedented seriousness of Durham County Cricket Club’s financial situation. To help them through these difficulties and continue as a First Class County, this had to be addressed with immediate, practical financial assistance
“We also have a wider responsibility to the whole game and need strong deterrents in place to preserve the game’s integrity and financial stability.
“Durham have made a strong contribution to the game as a First Class County, through domestic competitions, local participation and producing fine England players. We now look forward to working productively with the new Board of Directors in the restructured company and supporting a healthy future for Durham County Cricket Club and the game in the North East.”
A Durham County Cricket Club spokesperson said: “The Durham County Cricket Club Board welcomes the ECB’s long-term commitment to safeguarding First Class Cricket in the North East.”