The New COLP and COFA Rules Are Now Confirmed

The Legal Services Board has approved the SRA’s rule changes separating the roles of COLP and COFA from individuals who hold unilateral decision-making power within a firm. The changes will be implemented on a phased basis starting in January 2027.

The SRA consulted on the proposals in December 2025, confirmed its approach in June 2026, and the LSB established the final rules in August 2026. The SRA’s stated aim is to reduce the risk that conflicts of interest or weak internal challenge allow issues to go unreported.

During the consultation process, the SRA made one significant concession. The original proposal set the client money threshold at £500,000. Following feedback from the Law Society and others that this would disproportionately affect smaller firms, the SRA raised it to £2 million. That single change reduced the number of small firms caught by the rule from around 1,300 to 576, while still covering 99% of all client money held across the profession.

The turnover threshold remained at £600,000.

Does This Affect Your Firm?

The rule applies to firms with more than one manager or owner where either of the following is true: annual turnover exceeds £600,000, or client money balances exceeded £2 million at any point in the most recent accounting period.

If your firm falls below both of those thresholds, this change does not apply to you.

If your firm meets either threshold, the rule prevents any individual who can unilaterally determine or direct significant management decisions from simultaneously acting as COLP or COFA. That includes managing partners, sole decision-makers within a partnership, and any person whose authority allows them to make and implement decisions regardless of others’ views.

Sole practitioners and limited companies with a single director should pay attention here. Where a sole owner-manager firm operates beneath the thresholds, the sole owner-manager can continue to act as COLP but not as COFA.

Why the Word “Unilateral” Matters

The word the SRA added during the approval process, and the one that determines whether your firm is affected, is “unilateral”. Its ordinary meaning is straightforward: one person has the power to make and implement decisions without needing anyone else’s agreement or authority to carry them out.

The question every firm above the thresholds needs to answer honestly is whether anyone in the firm specifically holds that unilateral power. The reality may be different from what the partnership agreement says.

If there is genuinely no single person in your firm who can make and implement unilateral decisions, then the rule does not require you to change who holds the COLP or COFA roles. But you must assess this truthfully, not hopefully.

Here are the situations that commonly arise:

Managing partners. If your firm has a managing partner who is also the COLP or COFA, look carefully at the role and its decision-making powers. Managing partners who hold these compliance roles are probably well advised to step down from one or the other. If you want to maintain the managing partner as COLP or COFA, you must make it very clear how decisions are made and how voting works in the firm, and it must be demonstrable that the managing partner can be overruled. This needs to be documented and must work in practice, not just on paper.

Casting votes. If your partnership agreement or shareholders’ agreement gives any individual a casting vote, that person cannot be the COLP or COFA. This applies whether the casting vote is written into the agreement or simply operates informally in practice.

Prospective restructuring. Be cautious about making changes to decision-making structures solely to allow someone to retain the COLP or COFA role. The SRA will look behind the paperwork. If a unilateral decision-maker has been in place and the firm restructures to comply on paper while the practical reality has not changed, that will be open to challenge.

What to Do If a Change Is Needed

If your assessment concludes that the current COLP or COFA holds unilateral decision-making power, the most straightforward course is to appoint someone else to the compliance role.

When identifying a replacement, keep the following in mind:

• The COLP must be a qualified lawyer.
• The COFA does not need to be a qualified lawyer but must have experience in law firm financial management and a working knowledge of the SRA Accounts Rules.
• SRA approval is required for any new COLP or COFA appointment, and the application process can take up to three months. The form to complete is an FA2, and it requires a detailed explanation of the applicant’s experience. Take care with the application: a rejection is unlikely to be overturned. While there is no mandated minimum period of experience, the general view is that an applicant with fewer than three years’ relevant experience is unlikely to be approved.

If your firm does not currently have a natural candidate, consider establishing a Partnership Board or Board of Directors, a group of three or more partners or directors who share decision-making powers on behalf of the wider partnership without a casting vote given to any one member. This has the added benefit of strengthening the firm’s governance more broadly.

Whatever structure you adopt, make sure that decisions taken by the firm are documented and that there is a clear vote recorded against significant decisions. This provides the evidence the SRA will look for when assessing whether decision-making is genuinely shared.

Our Recommendation: Take a Precautionary Approach

The SRA has signalled that it will look to challenge firms on how they have applied these rules. We recommend a precautionary approach. If there is any doubt about whether the person holding the COLP or COFA role has unilateral decision-making power, it is better to make the change now rather than defend the position later.

Remember: this rule change is only of concern to your firm if, on proper consideration, it applies to your current or prospective COLP or COFA. If you genuinely do not have a person with unilateral decision-making power, you do not need to take any action, but you should document that assessment so you can evidence it if asked.

For further information on the COLP and COFA roles and what the SRA expects, see the SRA’s own guidance: Responsibilities of COLPs and COFAs.

The SRA has confirmed that guidance will be published this autumn and said it is working with the national and regional law societies as well as other interest groups to advise on practical steps that firms can take. The rule changes are due to be phased in during early 2027, with smaller firms allowed longer to comply.

How RACO Can Help

If your firm needs to change its COLP or COFA, or if you are unsure whether the new rules apply to your current arrangements, we can help.

RACO presents multiple COLP and COFA applications on behalf of firms and can guide you through the process from start to finish, including advising on the best way to get the candidate approved, completing the FA2 form, and engaging with the SRA throughout the approval process.

If you would like us to prepare your application, review your governance arrangements, or discuss how these changes affect your firm, call us on 0203 985 8550, complete the online enquiry form, or email us at info@regulationandcomplianceoffice.co.uk

COLP and COFA Training – Tailored Training for Your Firm

COLP Masterclass: The course is designed to consider and discuss all the aspects you must implement to fulfil your duties and responsibilities as a COLP. Find out more about the COLP Masterclass Course.

COFA Masterclass: A detailed course prepared for the Compliance Officer for Finance and Administration (COFA), whether you are new to the role or an existing COFA. Find out more about the COFA Masterclass Course.

Wider Support for Law Firms and Compliance Officers

SRA Compliance Essentials Service: provides structured, ongoing support across the areas that matter most to managing partners, COLPs, COFAs and MLROs:

• Documented and current Policies, Controls and Procedures
• Firm-wide risk management and AML compliance
• Staff training and regulatory awareness
• Independent audit and reporting
• Ongoing advisory support

The service is designed to demonstrate a compliant environment, support insurer and SRA engagement, and reduce regulatory risk exposure. Find out more about the SRA Compliance Essentials Service.

Risk & Compliance Management Service: provides your firm with an outsourced compliance team, delivering structured register administration, regulatory guidance and monthly reporting to support your COLP, COFA and MLRO. Designed to ensure ongoing oversight, documented monitoring and clear evidence of effective compliance management. This service is designed for firms where:

• Compliance is not a full-time internal role
• Regulatory officers require structured operational support
• Registers and notifications require active management
• Partners require visibility of regulatory activity

This service is designed to provide continuous oversight of notifications, registers, investigations and reporting to ensure your firm can evidence effective compliance management at all times. Find out more about the Risk & Compliance Management Service.