Solicitors successor practice rules: SRA MTC and PI cover on merger, split or takeover

Reviewed by Matthew Bartlett, Director · Last reviewed 2026-07-06

~5 min read

When a solicitors firm merges with, is taken over by, splits from or otherwise transitions into another firm, the SRA Minimum Terms and Conditions decide who carries the professional indemnity liability for the outgoing firm's work. That mechanism is the successor practice rule. It sits in the definitions section of Schedule 1 of the SRA Indemnity Insurance Rules 2020 and it is one of the most consequential provisions in the whole MTC, because it determines whether a firm that has ceased needs to buy the SRA's six-year run-off cover or whether it can rely on an incoming firm's live PI policy to pick up its historic exposure.

The concept in outline

A successor practice is a firm that is deemed, for MTC purposes, to have taken on the work and the professional indemnity liability of a preceding firm. Where a successor practice exists, the preceding firm does not need to buy separate run-off cover; the successor's PI policy is the vehicle for defending and paying claims that arise out of the preceding firm's work. Where there is no successor practice, the preceding firm must buy six-year run-off cover at cessation under clause 5 of Schedule 1 of the MTC. See our related entry on placing solicitors six-year run-off cover.

When a successor practice arises

The MTC definition captures several classic scenarios. A firm is a successor practice where it takes over the whole or substantially the whole of the business of a preceding firm — most obviously on a merger or acquisition where the incoming firm absorbs the outgoing firm's client base, staff and files. It also arises where a firm holds itself out to the world as continuing the practice of the preceding firm, for example by keeping the same trading name, telephone number, address, website and client-facing branding. And it arises where the majority of the principals of the preceding firm become principals of the incoming firm within a defined period.

The test is deliberately factual. A firm cannot decline the status of successor practice by disclaimer alone if the substance of what has happened points to succession — that is, if the clients, files, work-in-progress, staff and business identity have moved across. Conversely, if two firms merely share a partner and a floor of an office building without any real integration of practice, that is unlikely to make one the successor of the other.

Splits, breakaways and partial transfers

The definition is more difficult where a firm splits into two or where a single team leaves to set up a new practice taking part of the book with it. The MTC does allow for more than one successor practice to a single preceding firm — a preceding firm can be succeeded by two firms if each has taken a distinguishable part of the business. Practically, however, this needs to be documented clearly at the point of the split. Insurers reviewing a matter years later look at contemporaneous evidence — client-transfer letters, staff-transfer records, file inventories — and where the evidence is thin, both incoming firms may find themselves arguing with each other and with insurers about who owns the historic liability.

Where a genuine partial transfer has occurred, and no full successor exists, the preceding firm typically still needs run-off cover for the residual work that did not transfer. Practitioners considering a split should treat the successor-practice question as a placement question, not an afterthought — the position needs to be resolved and documented before the SRA is notified of the changes.

Documenting the succession

Underwriters and, later, claims teams look for a short evidential trail. That typically means a written transfer agreement identifying the assets, staff and client relationships that have moved across; SRA notification of the changes at the incoming and outgoing firms; a communication to clients confirming who now holds their files and who is responsible for their matters; and a note on the incoming firm's file-management system flagging the succession and the affected matters. None of this is complicated, but it is often missed. The absence of a contemporaneous record can become a live coverage issue on a matter that surfaces five years after the deal.

The insurer's role

A firm that is going to be a successor practice needs to notify its PI insurer before or at the point of the transaction. Insurers underwrite on the basis of the book they are being asked to cover, and the addition of a preceding firm's exposure is a material change under sections 3 and 4 of the Insurance Act 2015. Notifying at inception avoids arguments about fair presentation later. It also gives the insurer the opportunity to price the additional exposure or, occasionally, to decline the extension — in which case the deal itself may need to be restructured or the incoming firm may need to place a separate policy layer.

Worked example

Illustrative only. Firm A, a five-partner high-street firm with a residential conveyancing back-book, is absorbed by Firm B, a 12-partner regional firm, on 30 September 2026. Firm B takes over Firm A's client files, retains three of the five Firm A partners and the office lease, and continues to operate the Firm A office under the Firm B brand. Firm B is the successor practice. Firm A does not need to buy six-year run-off cover at cessation; Firm B's PI policy carries the historic liability. Firm B notifies its insurer in July 2026 and pays a premium adjustment reflecting Firm A's historic fee income and claims record. The transfer agreement, dated 15 August 2026, records the movement of files, staff and lease. Firm A gives SRA notice of cessation on 1 October 2026 and cites the successor-practice arrangement. The clients are written to on 25 September 2026 explaining who now holds their matters.

Where succession fails to attach

If, on the same facts, only one of the five Firm A partners had moved to Firm B and Firm B had taken only 30 per cent of the client files, Firm B would not be the successor practice. Firm A would then need to place six-year run-off cover, priced against the last active-year premium, and Firm B would still need to notify its insurer of the partial book acquisition as a material change. The outgoing firm's run-off is not optional in that scenario — it is the primary compliance mechanism the MTC provides for a firm that has ceased without a successor.