Ownership, and the risks of defaulting companies
When you buy something it becomes yours. You own it. Simple, right? Except, when it's not so simple.
Whisky is a regulated product, especially when it's in 'duty suspension'. Because the government hasn't received its 'share' in the form of taxes, they keep a close eye on all casks stored under bond. And they require licenses, record keeping, etc. One option is for a cask broker to hold the cask on your behalf. This has the benefit of using their licences. But, in this arrangement, who legally owns the cask? In some cases, when you dig into the detail, you may find that the cask broker retains ownership, with them effectively 'owing' you for it.
Why is this a problem? Well, what happens if that company goes bust? The company would be liquidated and its assets sold to pay debts. Crucially, its assets may include casks intended for you. And depending where you fall on the list of priority creditors, you may have trouble getting your cask - or the money from your cask. Not good.
But, don't worry, there is a solution and it's called bailment.
Bailment, and how it relates to whisky casks
Bailment is a legal term you may not have come across. It's not relevant to paper assets (for example, shares); these are covered by different laws. But, bailment is a fairly simply concept.
Bailment is where one person gives a physical asset to another party, under the condition that they either get it back at an agreed date, or it is disposed of as per their instructions. So, to make that more relevant, that means you (the bailor) give the asset (whisky casks) to the cask broker (the bailee) to look after on your behalf until you're ready to get it back - or sell it on.
And why does this solve the problem we outlined previously? Well, this makes it clear that the casks are your legal property. If the broker were to go insolvent, your legal assets can't be used to cover their debts. Your casks remain yours and are protected.
Spiritfilled work exclusively on a bailment basis
Here at Spiritfilled, looking after our clients and their interests is our number one priority. This is why all our casks are covered by bailment agreements with our clients. We certainly don't intend on going anywhere. But, in the most unlikely of unlikely scenarios, our clients would be protected. Their casks remain their casks.
We hope this guide to bailment and why it's relevant to whisky casks was useful. If you'd like further information on buying whisky casks, you may enjoy reading our free Whisky Cask Guide which you can download here. It covers a range of topics, including bailment.And if you're interested in working with us here at Spiritfilled, we'd be delighted to explore how we can help. Contact us here today and one of our cask experts will explain how we can help, and the whisky casks we have available for purchase.