Did Michael Gove’s father’s business fail?

In interviews explaining his reasoning for feeling strongly about the European Union Michael Gove has referred to his father’s fish business, E E Gove and Sons, a wholesale fish merchant and curer, being badly affected by European fisheries policy. Mr Gove has explained that the business employed some twenty people and they all ended up losing their jobs as a result of the European Union. In an interview with the BBC he talks about the business going “to the wall” and being forced to close. And in an interview with Sky News he said, “My father had a fishing business in Aberdeen destroyed by the European Union and the common fisheries policy.” When hearing about a business going to the wall and being destroyed as a casual listener (albeit a casual listener with a professional interest in the law of insolvency) I understood this to mean that the business had entered some insolvency process. Failure of a business usually (one could go so far as to suggest invariably) leaves unpaid creditors, including unpaid employees. And when there are unpaid creditors the normal process is for insolvency proceedings to begin.

I was interested then when Severin Carrell in the Guardian wrote that he had contacted Mr Gove’s father and ascertained that the business had not gone to the wall or been destroyed but had been sold, apparently as a going concern.

My interest was further piqued when Mr Gove responded. He told the BBC audience last night

“My dad was rung up by a reporter from the Guardian who tried to put words into his mouth but my dad has been clear, he was clear to the BBC on Sunday night, he was clear to me when I was a boy, that the business that he invested so much care and time in had to close as a result of the common fisheries policy.

“I remember when my dad ran his business. Two of his employees were lads who were in a care home. They did not have parents. My dad took them in, gave them a job and allowed them to work in his business and to sleep there in a spare room that he made for them. That business closed. Those boys lost their home as a result of what happened. I know what my dad went through when I was a schoolboy and I don’t think that the Guardian or anyone else should belittle his suffering or try to get a 79-year-old man to serve their agenda instead of agreeing and being proud of what his son does.”

This suggests the business “had to close” forcing people out of work. It is less strong than the previous implication that the business went to the wall. I was sufficiently intrigued to check whether Mr Gove senior’s business was subject to an insolvency event and to see if Mr Gove is letting the rhetoric carry an emotional charge that overstates what happened.

If the business is a company in Scotland the usual insolvency process is liquidation – either initiated by creditors or by the company itself. Liquidation is currently regulated by the Insolvency Act 1986 – but the basic rules largely repeat the rules from the predecessor acts (primarily the Companies Act 1948).

If the business is a firm constituted by a partnership contract the default procedure for insolvency in Scotland is sequestration. A firm created by a partnership contract has separate legal personality (meaning that it can own property and enter contracts in its own right) but – unlike in a company – the partners of the firm are personally liable for the debts of the firm and an insolvency event affecting a firm can also impact on the individual partners. Sequestration in Scotland is carried out under the Bankruptcy (Scotland) Act 1985 (which is in the process of being repealed and replaced by a consolidation statute recently passed by the Scottish Parliament). The processes in the 1985 Act largely follow the processes of the predecessor act, the Bankruptcy (Scotland) Ac 1913.

Alternatively, an individual can trade as a sole trader, using a trading name. In those cases business failure can be catastrophic for the individual as he or she is personally subject to sequestration under the Bankruptcy (Scotland) Act 1985.

In Scotland any liquidation of a company must be notified to the Edinburgh Gazette, the state’s official publication of legal notices. This has been the case since liquidation was introduced. The current rules are found in s 85 of the Insolvency Act 1986 (if the process is initiated by the company) and in the relevant court rules (for the Court of Session or sheriff court) where the winding up is initiated by creditors. Until 2014 any sequestration in Scotland (of a firm or an individual (or indeed any other body subject to sequestration) required to be notified to the Edinburgh Gazette under s 15 (6) of the Bankruptcy (Scotland) Act 1985 (and predecessor legislation).

The Edinburgh Gazette then would have information about the failure of E E Gove and Sons if the business had gone to the wall or been destroyed (in the sense that an ordinary listener would understand it).

Fortunately the Edinburgh Gazette is now available on-line and is fully searchable.

A search for “E E Gove” brings up no relevant hits.

A search for “Ernest Gove” brings up no relevant hits.

The conclusion is straightforward. E E Gove and Sons may have been sold. It may, if a partnership or a sole trader business, have come to an end in an orderly fashion with all creditors paid. It did not “go to the wall” or be destroyed in the sense in which Mr Gove appeared to be tacitly allowing it to be understood.

About loveandgarbage

I watch the telly and read when not doing law stuff and plugging my decade and a half old unwatched Edinburgh fringe show.
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10 Responses to Did Michael Gove’s father’s business fail?

  1. Mark says:

    Maybe they went on a company outing to the Antonine Wall

  2. paulscottrobson says:

    It’s interesting.

    As often is the case in journalism the person quoted doesn’t say what the journalist interprets him as saying appears to be made up to suit the article writers views. This is the actual bits (note the selective quoting as well)

    “more or less collapsed down” after the EU became involved in fisheries policy, but he said he sold his firm voluntarily, as a going concern. “It wasn’t any hardship or things like that. I just decided to call it a day and sold up my business and went on to work with someone else,” he said.

    He did sell it voluntarily but not as a “going concern”, or at least you can’t draw that conclusion. There are other options between one extreme (going concern) and another (bust)

    I would suggest that the most likely interpretation, though this is just a suggestion is that the business was either winding down or being wound down and the remnants of it were sold off.

    Gove is still using hyperbole (a feature of this referendum ….) but such would be consistent with Gove Snr’s previously stated views and explanation.

    The “going concern” appears to be fabricated from a combination of “voluntarily” and “wasn’t any hardship”.

    Mind you, the Guardian was complaining about offshore tax companies yesterday…… so they don’t do self awareness obviously.

    • Very good points. It is feasible it was sold and then wound down, or sold as part of an orderly wind down (with creditors paid off) as I indicate in my final paragraph. Further digging could be carried out on the sale by, for example, checking the Register of Sasines for transactions involving the site of the curing unit during the period when a sale might have taken place and that might clarify things.

      • paulscottrobson says:

        Oh, I agree. I would suggest though that while Gove is a bit OTT, the business could still have been effectively destroyed by the EU, in the sense that the business which it conducted was ended due to EU regulations (it’s not something I know a lot about). This doesn’t preclude it being wound down and sold without being wound up.

        It really depends on the sale, we just don’t know. Some sales are just the carcasses of businesses that are in practice dead, but not actually bankrupt. When the writings on the wall. Nobody’s been to your cafe for a month, so you aren’t bankrupt yet, but it’s not sensible to continue, so sell off the equipment. Or it could have been a going concern. Or somewhere in the middle, it could have been too small to operate except as part of a larger organisations due to increasing rules.

        As I said, I know very little about this area, but is it possible that a fishing quota was part of the company, so that would have a value in itself.

        My main real issue is not with yourself at all, but the Guardian which is putting words into Gove Snr’s mouth.

        And the paucity of remotely intelligent debate regarding the referendum. (not you here obviously !). Both sides seem to be competing to shout “We’re all going to die” the loudest.

  3. albasas says:

    Does every business need to close because of an insolvency event? Maybe he just took a decision to close it before it got too deep into debt? “Forced to close.”

    • I hoped the final sentence covered this. I was merely trying to show that something suggested by the media isn’t actually what happened and note that the business could have come to an end in orderly fashion with distribution to all creditors. Although that doesn’t sit with Mr Gove senior’s comments which talk about sale. If the business had operated as a company (and this is not clear from the material in the media and I have been unable to confirm) it would have needed to be wound up to ensure orderly distribution of the assets.

      • albasas says:

        Was it an incorporated family entity or a partnership, self employed? Hard to ascertain here. If I want to close my business due to distressed trading economic factors I could, but it wouldn’t be insolvency unless I sought such help or creditors did it for me.

        • it’s not clear. Some news reports mention a company but I can’t find a trace in companies house records – and if it was and went out of business (however that happened) winding up would be necessary for shareholders to get capital out of the company. The name used makes it sound like a partnership “EE Gove and Sons” but it could be a trading name for a sole trader.

  4. neilking says:

    Mmmmh. I am remainer and a lawyer and I generally despise all politicians’ spin but I think a business going gradually down hill to the point where it’s owner decides to face facts and wind it up in an orderly fashion before reaching an insolvency, or sells as a going concern at undervalue to an asset stripper, is consistent with “going to the wall”.

    • The reporting has suggested it went “bust” (an assertion uncorrected to date, which was what I imagine started the Guardian looking at the story). That is what piqued my interest initially. My final para indicates alternative explanations.

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