What is a D.O. and do I need one?

Do I need a delivery order (DO) to own a cask of whisky?

Delivery Orders & Legal Protections For Cask Owners

Building a portfolio of whisky casks was once regarded as something of a niche investment, only available to industry insiders. However, the market has grown significantly over the last few years as more distilleries release casks for sale, accompanied by an increasingly lucrative secondary market of rare casks in the hands of private individuals.

It’s clear that there is money to be made from whisky casks, alongside the satisfaction involved in owning a cask throughout all—or a part—of its journey from barrel to bottle. 

With new companies springing up across the industry, there has been a growing number of articles and advice on the subject of cask ownership – offering guidance with varying levels of accuracy. Many investors are faced with inconsistent messages about cask ownership and the documentation required to protect their interests. Among the most common misconceptions is the idea that the traditional ownership model provides a higher level of protection than managed ownership. 

So what’s the difference between those models? And, what  legal documentation exists to protect cask investors in each case?

Whisky Cask Investment 101

At the centre of the Scotch investment universe is HMRC (Her Majesty’s Revenue & Customs), which is tasked with the oversight of casks from the time they are distilled until bottling. The reasons are twofold: First, this government entity wishes to ensure the integrity of Scotch whisky by tracking the provenance of each cask so that any bottle labelled as ‘Scotch’ can be verified to have met all the requirements. Second, the HMRC collects the tax revenue on every cask when it is bottled.

In order to regulate the industry, every cask must remain under bond in an HMRC accredited warehouse for the entire time in which it matures. 

Delivery Orders

Every time a cask is moved to a different warehouse or the owner of record is changed, the HMRC accredited warehouse uses a document called a Delivery Order, often simply referred to as a ‘D.O.’ or ‘DO’, as a receipt that documents the transaction. Delivery orders vary in appearance from warehouse to warehouse, but must include the warehouse letterhead, details of the transaction and a signature from the warehouse keeper. 

While the Delivery Order is simple in presentation, there are requirements which must be met before the transfer can be completed and the document issued. The first requirement is that the owner must possess a WOWGR certification or, for buyers outside the UK, engage a duty representative. The second requirement is that the buyer must open an account at the warehouse, which can be approved or denied based on the procedures put in place by the warehouse for new accounts.

It is worth noting that there is an exception for the WOWGR certification for individual buyers, but there is uncertainty surrounding the limitations as to the number of casks that can be owned in order to comply (HMRC has not provided clear guidance on the exception). But, more importantly, nearly every warehouse in Scotland will no longer open accounts for individuals unless they possess a WOWGR or duty representative. In addition, due to the expansion of the industry, most warehouses are only looking to establish new accounts for buyers who own a sizable number of casks.

The bottom line is that most warehouses don’t accommodate individuals who might only own a few casks, instead they want to open corporate accounts with hundreds or thousands of casks. This has made it more challenging for most individual investors to be able to meet the requirements necessary for a Delivery Order to be issued directly.

However, there is an alternative for private investors looking to gain entry to the lucrative whisky cask investment market. 

The Portfolio Management Model

Braeburn Whisky has pioneered the Portfolio Management model,which facilitates whisky cask investment for private individuals, allowing them to build their portfolio without the regulatory headaches and legal obstacles that have been put into place to protect the whisky investment market.

Through Braeburn Portfolio Management, all client casks are stored in a corporate account, which means there is no need to obtain a WOWGR or negotiate individually with a bonded warehouse. 

When a cask is purchased through Braeburn Whisky’s Portfolio Management programme, investors are provided with a certificate of ownership that gives them complete control over that cask, as well as a transfer document from the warehouse manager that states that they are the owner of that cask. That means they can choose to re-rack their cask (remove it from one cask and fill another), re-gauge it (check its ABV), bottle it, or sell it on to another investor whenever they feel the time is right. 

Under the Braeburn Whisky ownership model, all casks are stored in a warehouse in Speyside, dedicated to warehousing investor casks. That means investors know where the cask resides, and can trust that their investment is in safe hands for the entire lifetime of its maturation. And, of course, they are welcome to visit the cask whenever they like.

After purchasing a cask, a number of unexpected costs can arise for insurance, storage or even fees applied for moving it. Braeburn’s Portfolio Management is completely transparent, with no hidden costs. In fact, many of the costs (like the first three years insurance) are covered by the initial purchase.

And, of course, following this model, there is no need to go through the process of obtaining a D.O. in order to become a whisky cask investor.  

Legal Protections

Every investor needs to know that their investment is protected and their asset is secure. With that in mind, Braeburn Whisky has established a legal protocol that provides stringent protection for investors entering the whisky cask investment market. In order to ensure investor interests are at the forefront, Braeburn Whisky has contracted leading experts in contract law and customs & excise requirements to verify that the documentation establishes full legal ownership of each investment.

While casks are kept in a Braeburn Whisky corporate account, clients receive a certificate of ownership and a purchase agreement that establishes ownership and clearly defines the custodial relationship between the investor and Braeburn Whisky. Additionally, Braeburn Whisky provides a signed, third-party Letter of Transfer from the warehouse manager, stating that the cask has been transferred to the corporate account and that the purchaser is listed as the beneficial owner.

This legal protection ensures a level of trust and transparency that gives investors the peace of mind of knowing portfolios are protected to the maximum extent possible under the law and casks will rest safely for the full duration of the investment. 

An Investment Built On Trust

A strong, diversified portfolio is usually made up of different kinds of investments, each one with its own requirements and conditions. You don’t need a digital wallet to own a whisky cask. You don’t need to acquire a minimum amount of stock. You do need, however, the most important asset of all: trust. 

When entering a market that is relatively new and governed by complex trading rules and regulations you need to know that your cask is being cared for by a reputable company with a proven track record and a transparent approach to business. 

Once you’ve done your research into the fast-growing market in whisky casks, you may find the time is right to make your first investment.

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