Selling or Closing Your Law Firm? Key SRA Rules and Steps You Must Follow

Selling or closing a law firm is one of the most significant transitions in a professional career. Whether you are retiring, merging, or transferring ownership, the Solicitors Regulation Authority (SRA) imposes specific requirements to ensure that clients, funds and confidential information are protected.

This guide explains what you must do before, during and after the sale or closure of your firm, and how MAR Legal can support you through each step.

Notify the SRA Early

Under Rule 15 of the Authorisation of Firms Rules, firms must inform the SRA as soon as reasonably practicable if they intend to close, merge, or change structure.

Early notification allows the SRA to:

• Update the public register;
• Monitor client-matter transfers; and
• Decide whether any formal intervention is required.

Use the SRA Firm Closure Notification Form and submit it through the mySRA portal.

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Understand Successor Practice SRA Rules

If another firm takes over your ongoing matters or business name, SRA Indemnity Insurance Rules determine whether that firm becomes your successor practice.

A successor practice inherits professional indemnity liabilities for the closed firm’s work. Key triggers include:

• Acquisition of your business or clients;
• Employment of most of your staff;
• Use of your former trading name.

Understanding successor practice implications is critical when negotiating mergers or sales, as it affects both parties’ insurance exposure.

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SRA Rules: Manage Client Files and Trust Money

Before closure, you must:

• Notify all clients in writing and obtain consent to transfer or store their files.
• Return any original documents such as wills or deeds unless authorised to retain them.
• Reconcile client accounts under the SRA Accounts Rules and return residual balances.
• Retain records for at least six years in accordance with the SRA Code of Conduct for Firms.

Where balances remain unclaimed, follow the Residual Client Balances Guidance to pay them to charity with SRA permission.

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Professional Indemnity Insurance (PII)

You must maintain PII cover during the run-off period. Upon closure, your insurer provides a six-year run-off policy covering claims made after the firm ceases trading.

If you sell your practice, ensure that:

• The buyer’s insurer acknowledges any successor practice liability; or
• Your policy continues until the transfer is complete.

See SRA Minimum Terms and Conditions of PII for details.

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Data Protection and Confidentiality

Under the Data Protection Act 2018 and UK GDPR, you remain responsible for the lawful transfer or destruction of client data.

Practical steps include:

• Updating your Information Asset Register;
• Securely deleting electronic files not required by law;
• Updating your privacy notice to reflect data controllers’ changes;

Notifying the Information Commissioner’s Office (ICO) if you cease trading.

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Employment and TUPE Considerations

If staff transfer to another firm, the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) apply.
You must:

• Inform and consult affected employees;
• Provide employee liability information to the buyer; and
• Ensure continuity of employment rights.

Failure to comply can lead to tribunal claims, even where a small number of employees are affected.

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Record Keeping and Archiving

Even after closure, firms remain responsible for:

• Retaining accounting records for at least six years;
• Storing closed client files securely;
• Ensuring ongoing access for former clients or regulators.

Consider engaging a professional archiving service or secure cloud storage compliant with SRA confidentiality requirements. are affected.

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Common Pitfalls During Closure

1. Failing to notify the SRA promptly – delays can trigger an investigation.
   
2. Incomplete file transfers – lost or unacknowledged client records breach confidentiality duties.
   
3. Unreturned client funds – residual balances left unresolved are a regulatory risk.
   
4. Uninsured gaps – ensure run-off cover activates from the correct closure date.
   
5. Data protection oversights – forgetting to update or cancel ICO registration.

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MAR Legal’s Role in Firm Sales and Closures

MAR Legal assists law firms through every phase of closure or sale, providing:

• Preparation and submission of SRA notification forms;
• Advice on successor practice implications and insurance coverage;
• Drafting client communication templates and transfer agreements;
• Guidance on TUPE compliance and employment matters;
• Post-closure record-keeping and residual balance management.

We work with firms of all sizes — from sole practitioners retiring after decades in practice to medium-sized firms merging into larger groups — ensuring every regulatory step is handled correctly.

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After Closure: Continuing Obligations

Even after your authorisation ends, certain responsibilities remain:

• Responding to any SRA follow-up requests;
• Cooperating with the Legal Ombudsman regarding historic complaints;
• Maintaining insurance or successor practice arrangements;
• Ensuring former clients can access their documents.

Keeping accurate contact details with the SRA and insurers helps avoid future issues.