The name will be gone, but the team behind the recent Game Boy Zelda and Kirby games will still be at Capcom.
Much like the closure of Clover Studio, Capcom has decided to put its Flagship team back under the Capcom umbrella of developers. GameSpot reports that no one will be laid off in this studio "closure," and that the only thing that will change is "the company name on [Flagship's] business cards." It is unclear if the team will stay together, or if its members will be distributed where needed on various projects.
Flagship is best known as the development team that developed the Game Boy Color and Game Boy Advance Zelda games, including the Oracle games and The Minish Cap. It also handled development duties for Amazing Mirror and Squeak Squad, two handheld entries in the Kirby series.