Why are some Canadian companies making their employees owners instead of selling out to America?

Aaron Schroeder’s company was not for sale, yet the offers kept coming.

For years, the Vancouver-based climate engineer received a few unsolicited bids every month, sometimes a couple every week. Offers were often from large companies and hedge funds, especially companies based in the United States.

When Schroeder was ready to sell Brightspot Climate, an engineering consultancy with offices in Vancouver, Calgary and Toronto, he decided to go in a different direction and create a special trust to own all of its 40 employees.

“I wanted to create a model where everyone in the company could participate, but no one had to put any money up front,” he said.

Various forms of employee ownership have existed in Canada for decades, but in 2024, the federal government amended the Income Tax Act to introduce a new option called the Employee Ownership Trust (EOT).

Since then, four companies have made the switch, including Brightspot.

The new type of ownership comes at a time when the country is facing a wave of baby boomer entrepreneurs nearing retirement and a focus on strengthening the national economy in the face of a trade war with the US.

Schroeder says he wanted to reward the employees who helped build the business. They also feared that the sale would lead to job losses and the demise of the company.

He said, “If we sold to an American company, all of our (intellectual property) and our culture would become American. We would be working for an American company.” “I see a huge value in keeping small businesses in Canada.”

time is running out

An EOT is a trust that holds company shares on behalf of employees. The trust finances the purchase of the company and is paid back to the owner over time using profits generated by the company. Employees do not buy shares, but there is profit-sharing.

For companies considering becoming EoT, timing is of the essence. The federal government offers a tax break for owners who sell their business to employees, but the incentive expires at the end of this year.

Without tax incentives, the future of EOT in Canada is uncertain.

“It’s a tough cutoff deadline,” said Tiara Letourneau, CEO of Vancouver-based consultancy Rewrite Capital Advisors, which is working with about a dozen medium-sized private corporations that are interested in becoming employee ownership trusts.

“Because companies need a long time to do this, that cutoff means they very much need to start now or their time is running out,” he said.

Canada’s business landscape is about to undergo a transformation, as thousands of companies prepare to change hands, according to a recent report from the Business Development Bank of Canada (BDC), with the demographic shift representing more than $300 billion in lost revenue over the next five years.

According to the BDC report, Canada is home to approximately 100,000 entrepreneurs over the age of 65.

In September 2025, Rewrite Capital Advisors was involved in helping Taproot Community Support Services become the largest EOT in Canada, operating in BC, Alberta and Ontario with 750 employees.

temporary tax incentives

EOTs have existed in the UK and US for many years. They have many advantages, but also some challenges, and often require a little generosity from the owner.

Typically, an owner will sell a majority of the company to employees and receive some of the money at the time of the sale, while the remainder is paid, usually over the span of several years. Business owners may be required to accept a lower price than if they could sell to a third party on the open market. The owner also has to wait to get all the money.

The federal government introduced a $10 million capital gains tax exemption to make EOTs more financially attractive to the owner who has typically spent several years building their business.

“The tax incentive is a nice kicker and definitely gets them interested and motivates them to look into it more deeply,” said Wes Novotny, a tax lawyer at Bennett Jones in Calgary who has worked with several companies interested in becoming EOTs.

Who has what in EOT?

Nikki Barrett spent years figuring out the future ownership of her company when a majority co-founder wanted to sell it, but several employees didn’t have the deep pockets to buy it.

“The more I looked at the structure and the opportunity, I thought, this is what we’re looking for. This is the answer,” said Barrett, chief executive of GrantBook, a Toronto-based company with 50 employees that provides digital tools and consulting to the nonprofit sector.

On January 1, 2025, Grantbook became the first EOT in Canada.

There were many questions in the minds of employees as to whether their salaries would be reduced until the co-founder was fully paid from the sale.

In response, the company trust took an early distribution of profits to March 2025 to “provide some relief,” Barrett said.

There is considerable flexibility in how the trust is set up and how profits are distributed.

Some employees may mistake EOT to mean the company is employee-led, Barrett said, but that’s not the case. Employees are owners and have greater influence, but a company is still led by management.

So far, he said, the ownership change is proving successful, as the team is united and “feels like we’re all moving in the same direction.”

Benefits, challenges of keeping businesses local

Another 20 to 30 companies are expected to become EOTs this year, said Justin Jansen, executive director of Employee Ownership Canada, an Ontario-based advocacy group.

Janssen hopes the federal government will increase tax incentives.

“We need a future tax base in this country,” he said. “From a purely economic standpoint, it’s no surprise to me that we would encourage our business owners to keep their business local.”

Asked about the future of the incentive, a Finance Department official said in an emailed statement this week: “While the Government of Canada reviews the tax system on an ongoing basis, it would be inappropriate to speculate on any potential or potential changes.”

If the founder decides to no longer run the company and the employees do not have the management skills or experience to take over, there may be challenges with employee ownership.

Employees may also need greater financial literacy to understand balance sheets and other documents.

And experts say employee ownership isn’t necessarily for everyone, as some entrepreneurs may struggle to give up control of the company they created, while decision making in a business with a board of directors in charge may be slower.

There have been some bumps along the way, but Schroeder says he’s happy with the changes he’s seen so far at Brightspot, including employee retention and attraction.

The spirit of entrepreneurship has started increasing within the company also.

“I have full hope now that some of these workers will someday go away and actually try to start their own companies, which I think is incredible for the Canadian economy,” he said.