Internal vs External Run-Offs for Law Firms

For law firms, the closure of a practice is never as simple as locking the office doors. Even when the final client has been billed, partners remain under significant obligation to clients and insurers. Legal matters in progress must be resolved, professional indemnity insurance (PII) run-off cover must be in place, and the Solicitors Regulation Authority (SRA) rules must continue to be met.

The run-off period is one of the most high risk yet least understood phases of practice management. Handled well, it can provide partners with a clean break and safeguard client interests. Handled poorly, it can lead to SRA intervention and financial exposure that undermines years of hard work.

Law firms approaching closure or restructuring generally face three options: to manage a run-off internally, to appoint an external provider to oversee an external run off, or seek to sell to a single purchaser, i.e. merge.. Understanding the distinction is essential for making an informed decision that balances compliance, peace of mind and maximises recovery of value locked into WIP.

Recent figures from the SRA for the 12 months to July 2025 stated there were 516 law firm closures. Interestingly only 21.9% of those were through Merger / Amalgamation. Change of status / Other accounted for 19.4% leaving by far the largest category of 58.7% as Ceased Practising.

Here we compare Internal and External legal run-off routes to that end game of “Ceased Practising”

Internal run-offs

An internal run-off means that the firm’s own partners or in house legal departments remain responsible for managing the closure process. On the surface, this approach can appear attractive. Partners retain direct control over how matters are progressed, and existing staff who know the files and clients may provide a sense of continuity.

However, these benefits come at a cost. Partners who intend to retire or move on to new ventures can find themselves tied down for months – sometimes years – dealing with legacy issues. Without specialist oversight, there is a real risk of non-compliance with SRA obligations or delays in file closures. As workloads reduce, absorbing fixed overhead becomes less efficient. Staff that remain are acutely aware they are working themselves out of a job. The further you get into the process the more complicated things become.  Poorly managed matters also heighten the likelihood of professional indemnity claims, increasing costs pressure and putting reputations at risk.

In practice, what begins as an apparently cost-effective solution often proves more complex and resource intensive than expected.

External run-offs

By contrast, an external run-off transfers responsibility for the closure of live matters to multiple legal firms with the combined outcome managed by a specialist provider. This option gives partners the freedom to step away from the day-to-day burdens of file management, while ensuring that client matters are handled properly and in line with regulatory requirements.

Ensuring capacity for given matter types, external providers deliver excellent client care and the timely progression of all matters. All the inefficiencies of an internal run-off are avoided. For many firms, the reassurance and efficiency gained far exceeds the risks of attempting to manage the process alone.

The Recovery First model

Recovery First offers a distinctive approach to external run-offs, designed to protect law firms and their clients during closure or restructuring. When a firm decides to close or no longer wishes to manage certain types of legal work, WIP files are transferred to a carefully selected panel of top tier SRA-regulated law firms. These panel firms take over the conduct of the cases, ensuring clients continue to receive compliant representation without interruption.

Throughout the process, Recovery First provides ongoing oversight and reporting, monitoring the progress of transferred cases and offering financial transparency. This ensures that matters are being managed efficiently and that recoveries are maximised.

The strength of the Recovery First model lies in its ability to relieve the closing firm of financial and regulatory burdens while maintaining compliance and maximising value from ongoing cases.

Why choose Recovery First?

Recovery First is the optimal choice for those looking for a structured exit from the legal services market and wanting to recover 100% of their WIP value, either due to difficulties in continuing their practice or due to retirement/restructuring.

Whatever the reason, Recovery First will ensure the most positive and profitable outcome is achieved. The unique scheme offered by Recovery First is suitable for both law firms and professional advisors. Our team manage the transfer of files from start to finish; placing case files with an approved law firm so as to protect the integrity of the client’s case.

We guarantee 100% confidentiality for all clients and perform due diligence on all files. If you would like to find out more about Recovery First’s process, you can contact us via email at david.johnstone@recoveryfirst.co.uk, or 07887796989, or contact Sally Dunscombe at sally.dunscombe@recoveryfirst.co.uk or 07774205870.