The Sheffield-headquartered firm, which generated almost £330 million in revenue last year, is understood to be working with advisers from US investment bank Stifel on options for its ownership structure.

The issue stems from a corporate reorganisation undertaken in 2012 when Irwin Mitchell was considering a stock market flotation. A holding company was created above the firm’s limited liability partnership, with partners receiving shares in the new parent company.

Although the planned initial public offering never materialised, former partners who later left the business retained their holdings in the parent company because no mechanism was introduced requiring them to sell their shares.

According to legal industry reports, former partners now control more than half of the holding company’s equity, raising concerns that major strategic decisions could be influenced by individuals no longer connected to the firm. Some are even understood to be working for rival organisations while continuing to receive dividends from the parent company.

As a result, Irwin Mitchell is considering external investment, with private equity seen as the preferred route. Such a deal could allow an investor and the firm’s current leadership to acquire shares from former partners and simplify the ownership structure.

Adil Taha, a former private equity executive and founder of legal sector consultancy Taha & Co, said: “The IPO did not happen, and the structure they went with had holes in it, not forcing partners to hand back equity when they exit.

“No doubt they are banking on an external investor to come in and buy the shares. External investors will see there is a good deal to be done here.”

No transaction has yet been agreed.