What Happens If Your Solicitor’s Firm Closes and How to Protect Your Money and Files

The two ways a firm closes

The difference determines who controls your file, and it is worth establishing first.

An orderly closure is voluntary. The firm winds down, returns or transfers files to clients or a named successor practice, and arranges insurance to cover future claims. Clients are usually contacted in advance and given a choice about where their matter goes.

An intervention is imposed. The SRA steps in to close a firm immediately to protect clients, and once closed the firm can no longer act for anyone. The power comes from Schedule 1 of the Solicitors Act 1974, with parallel powers for licensed bodies under Schedule 14 of the Legal Services Act 2007. Courts have long treated it as a drastic but necessary tool.

Interventions are not rare and have been rising. The SRA carried out 35 in less than six months of the current practising year, against 42 in the whole of 2024-25.

How low is the intervention threshold?

Lower than most people assume. The SRA does not need to prove dishonesty before closing a firm.

In Sritharan v Law Society [2005] EWCA Civ 476, the Court of Appeal confirmed the test is a reason to suspect dishonesty, not proof of it, with the Solicitors Disciplinary Tribunal deciding later whether wrongdoing actually occurred. The same approach was applied in Sheikh v Law Society [2006] EWCA Civ 1577.

Two earlier decisions frame why the power is drawn that way. In Buckley v Law Society (No 2) [1984] 3 All ER 313 the court recognised that intervention carries real risk to firms, but is a power Parliament deliberately granted to the regulator. In Dooley v Law Society (unreported, 15 September 2000) the High Court put the purpose plainly: protecting the public from dishonest or incompetent solicitors.

What happens to your money and files

Client money

On intervention the SRA takes control of all money the firm holds, including client money, which is held on a statutory trust. An intervention agent, usually another local firm, is appointed to identify who the money belongs to and arrange its return.

The money is protected from the moment of intervention. What takes time is identifying ownership, particularly where records are poor, which is frequently the reason the intervention happened.

Files and papers

The SRA takes all documents and papers, keeps them safe, and returns them to whoever owns them. A new solicitor can request your file, but the request has to be made and processed.

This is where live matters suffer. A conveyancing transaction mid-chain, a claim approaching limitation, or a hearing already listed will not pause because the firm closed. The protection is automatic; the urgency is yours to communicate.

Claiming from the Compensation Fund

The fund is a discretionary fund of last resort. No one has a right to a grant enforceable by law, which is the first thing to understand about it.

What it covers

Loss caused by the dishonesty of a regulated person or firm, including theft and misappropriation, and loss and hardship caused by a failure to account or a failure to complete work already paid for. It also steps in where a firm should have held insurance and did not.

What it does not cover

Losses arising solely from professional negligence, indirect or consequential losses, the firm’s trading debts, the professional costs of making the application itself, and distress and inconvenience.

Limits and deadlines

The maximum for a single claim is £2 million, though a higher sum is possible in exceptional circumstances in the public interest. Where multiple applications arise from the same or connected circumstances, the SRA can cap the total across them at £5 million.

An application must be made within 12 months of the date the applicant first became aware, or should reasonably have become aware, of the loss. The SRA may extend that period where circumstances justify it, but the extension is discretionary and should not be relied on.

Contributory conduct is also assessed. Where loss was caused by more than one party the SRA considers each party’s role before deciding whether to pay or reduce a grant, and an applicant who contributed to their own loss may see the application reduced or refused.

The scale of recent demand is worth knowing. Following Axiom Ince, the closure of PM Law Limited produced claims exceeding £20 million, after the SRA confirmed suspected fraud involving the improper removal and misuse of £39.5 million of client funds. Contributions to the fund are rising sharply as a result, as we set out in our guide to solicitor practising fees for 2026/27.

If the problem is negligence, not dishonesty

A different route entirely, and the distinction decides where you go.

Negligence claims go to the firm’s professional indemnity insurer. Every firm closing must carry run-off cover for six years after closure under the SRA Indemnity Insurance Rules, so a claim arising within that window has an insurer to answer it.

If a problem surfaces more than six years after closure and there is no successor firm, the Solicitors Indemnity Fund, now run by the SRA, may still respond, subject to the time limits in the Limitation Act 1980.

And if a firm closed without the insurance it was required to hold, the Compensation Fund can step in to fill that gap, which is one of the less well known parts of what the fund does.

To identify the insurer, you can request a professional indemnity insurance disclosure under Rule 9.2 of the SRA Indemnity Insurance Rules. Firms must provide their insurer details when properly asked.

What it means if you work at the firm

Most guidance on firm closure is written for clients. If you are a solicitor at an intervened firm, your position is different and considerably less discussed.

The intervention closes the practice, not your qualification. Your practising certificate is a personal authorisation and it does not lapse because your employer’s authorisation has been withdrawn, so you remain a solicitor and can seek employment elsewhere. What you cannot do is continue to act through the closed firm.

Three practical points follow, and they are easier to address before an intervention than after.

• Your files are no longer yours to hand over. Once the SRA has taken possession, transferring a file to a client or a new firm is not within your gift, however reasonable the request. Direct clients to the intervention agent.
• Undertakings survive the firm. A personal undertaking given by a solicitor is not discharged by the firm closing, and unresolved undertakings are a common source of difficulty afterwards.
• Your own position may be examined. An intervention triggered by suspected dishonesty will be investigated, and compliance officers in particular should expect scrutiny of what they knew and reported. Our guide to the COLP role covers where the reporting duty sits.

A solicitor who was not implicated is not disqualified from practice, but will need to explain the circumstances to a prospective employer, and doing that from a position of documented compliance is materially easier than doing it from memory.