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Countries that become free after termination are automatically initialized. The initialization procedure takes up to 15 game months to complete and after completion, the country becomes free and available for a other members.
During the termination process, many of the country parameters are reset to their original value. This applies to the population numbers, education, health and a very large number of other parameters.
Some parameters are harder to reinitialize. Loans must be paid back because each loan has a loan provider that may be another country and that country should not incur any damage resulting from the termination process.
It is also not possible to terminate some of the corporations in the country. Some of the corporations may be privately owned and it is not reasonable to terminate such private corporations. The result may be that a country with a population of 5 millions will have a large industry with shortages of workers.
In the months following the initialization procedure, some of the corporations will probably close due to lack of workers. The private corporations in the country are better positioned to try and get the workers they need and survive the decline in the industry.