Many distilleries and cask sellers have clauses in their contracts that restrict what the owner can do with their cask during and after maturation. These constraints are called restrictive covenants. Many of them are benign and designed to protect you, the cask or the warehouse. There are some restrictions that do have an impact on the current and future value of a whisky cask.
Another common inclusion in contracts are profit share. This is when a cask dealer adds a clause to the contract that entitles them to a share of any future profits.
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Restrictive Covenants
Restrictive covenants are clauses in a contract that limit how a cask owner may use their cask in the future. These restrictions include things like not being able to use the distillery’s name on bottlings of the cask.
Another common restriction is to do with bottling itself. For example, some current distillery cask offerings specify that the cask must be bottled rather than being sold on as a cask.
These clauses have an impact on the current and future value of the cask you are being offered. Casks with naming rights (i.e. the ability to label bottles from the cask as “distilled in the xx distillery) are more valuable that those without. Bottling clauses also impact the future taxes you may need to pay – both through duty and VAT due when the cask is bottled and through potential capital gains because bottles are not classed as a wasting asset.
If you are buying the cask through a delivery order you should also agree terms with the warehouse. This may cover how, and when you can sell your cask. Do they let you visit your cask? Can you draw samples from your cask? If this is something that is important to you then it is important that you check your contract thoroughly.
Profit Shares
Profit shares are clauses in the contract that state that a dealer or distillery is entitled to a certain percentage of the cask owner’s profit when they eventually come to sell the cask. This percentage is often somewhere around 10-20% which is a large percentage of any potential profit.
Most cask brokers often take a percentage fee for helping you to sell your cask. The issue with a profit share clause is that it ties you to selling with that company because otherwise you will have to pay two fees.
Reading and understanding the contract and how it will affect your buying, owning, and selling experience is vital so that you can avoid any surprises when it comes to your whisky cask.
