What happens if a fund such as iShares S&P or the Vanguard S&P closes down? Will it be liquidated completely and transferred back to our account? Or do we lose the amount invested in that fund?

Nothing lost, no problem, with 'physically replicated' ETFs, Your property.

with 'synthetically replicated' (ETFs) f.ex. Europe domiciled ones

there could be default risk, however (SWAPs as an instrument to replicate)

with ETN (= exchange traded notes or 'certificates') there truly is

a counterparty default risk, so buy physically replicated ETFs only, never synthetically replicated or ETNs