Before closing or selling, an AMC has to send a request to the SEBI which acts as a regulatory body. Only after the approval from SEBI, an AMC can be shut or taken over. However, SEBI also holds the right to close an AMC if the fund house fails to follows the norms.
When an AMC closes, the investors are provided with their invested amount on the basis of the latest NAV of the schemes in which they have invested.
If a fund house decides to take over the AMC, then the schemes are either merged or the AMC continues to work under the monitoring of fund house which bought it.