Why some Canadian companies are turning their workers into owners instead of selling to the U.S.
Aaron Schroeder's company wasn't 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. The offers were often from larger companies and hedge funds, especially those 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 make all 40 of his staff owners. "I wanted to have a model where everyone in the company could participate, but nobody has to pay any money up front," he said. Different types 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 an 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 an increased focus on strengthening the national economy in the face of a trade war with the U.S. WATCH | How employees can become owners without having to pay:Justine Janssen, executive director for Employee Ownership Canada, and Tiara Letourneau, CEO of Rewrite Capital Advisors, explain what an EOT is and what's unique about the ownership model.Schroeder says he wanted to reward the employees that helped build the business. He also feared a sale would result in job losses and would erode the company. "If we'd sold out to a U.S. company, all of our [intellectual property] and our culture would become American. We'd be working for an American company," he said. "I do see a huge value of keeping small businesses Canadian." Time running outAn EOT is a trust that holds the company's shares on behalf of the employees. The trust finances the purchase of the company and the owner is paid back over time using profits generated by the company. The employees don’t buy shares, but there is profit-sharing.For the companies considering becoming an EOT, time is of the essence. The federal government offers a tax break for owners who sell their businesses to employees, but the incentive runs out at the end of this year. Without the tax incentive, the future of EOTs in Canada is uncertain. "There is this hard cutoff deadline," said Tiara Letourneau, CEO of Rewrite Capital Advisors, a Vancouver-based consultancy that is working with about a dozen mid-sized private corporations that are interested in becoming employee ownership trusts. "Because companies need a long time to do it, having that cutoff means that they pretty much need to have started now or they're running out of time," she said. Canada’s business landscape is about to undergo a transformation, according to a recent report by the Business Development Bank of Canada (BDC), as thousands of companies are poised to change hands, with the demographic shift representing more than $300 billion in revenue over the next five years. Canada is home to about 100,000 entrepreneurs over age 65, according to the BDC report. In September 2025, Rewrite Capital Advisors was involved in helping Taproot Community Support Services, which operates in B.C., Alberta and Ontario with 750 employees, become the largest EOT in Canada. Temporary tax incentiveEOTs have existed in the U.K. and the U.S. for several years. They have many advantages, but also some challenges, and often require a bit of generosity on the owner. Typically, an owner will sell the majority of the company to the employees and receive some of the money at the time of the sale, while the remainder is usually paid over a span of several years. Business owners may need to accept a lower price compared to selling to a third party on the open market. The owner also has to wait to receive all the money.The federal government introduced a $10-million capital gains tax exemption to make EOTs more financially appealing for an owner who has typically spent many years building their business. The tax incentive is "a nice kicker and definitely gets them interested and gets them looking at it more in-depth," said Wes Novotny, a tax lawyer with Bennett Jones in Calgary, who has worked with several companies interested in becoming EOTs. Employee ownership trusts, or EOTs, are good for the employees, their communities and the economy, says Wes Novotny, a tax lawyer and parter with Bennett Jones. The ownership model can also benefit entrepreneurs, he says, as it keeps their legacy alive as their business continues. (Monty Kruger/CBC)Who owns what in an EOT?Nikki Barrett spent several years trying to figure out the future ownership of her company, when a majority co-founder wanted to sell, but many employees didn't have deep pockets to buy it. "The more I looked into the structure and opportunity, I thought, this is exactly what we're looking for. This is the answer," said Barrett, chief executive of Grantbook, a Toronto-based company with 50 employees providing digital tools and consulting for the not-for-profit sector.On Jan. 1, 2025, Grantbook became the first EOT in Canada. Staff had many questions including whether their pay would be reduced until the co-founder was fully paid out from the sale. In response, the company trust paid an early distribution of profits in March 2025, to "put some wind in sails," said Barrett. There is plenty of flexibility in how a trust is set up and how profits are dispersed. Some staff can mistake that an EOT means a company is employee-led, said Barrett, but it's not. Employees are owners and have more influence, but a company is still led by management. So far, the ownership change is proving successful, she said, as the team is aligned and "feeling like we are all rowing in the same direction.” Benefits, challenges of keeping businesses local Another 20 to 30 companies are expected to become EOTs this year, said Justine Janssen, executive director for Employee Ownership Canada, an Ontario-based advocacy group. Janssen is hopeful the federal government will extend the tax incentive. "We need a future tax base in this country,” she said. "From a purely economic perspective, it's a no brainer to me that we would incent our business owners to keep their businesses local.” When 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 prospective changes." WATCH | The advantages and challenges of EOTs:Brightspot Climate chief executive Aaron Schroeder, Bennett Jones parter Wes Novotny, and Grantbook chief executive Nikki Barrett explain some positives and negatives about how EOTs work.There can be challenges with employee ownership if the founder decides to no longer run the company and employees don't have the management skills or experience to take over. Staff may also need more financial literacy to understand balance sheets and other documents. And employee ownership is not necessarily for everyone, experts say, as some entrepreneurs may struggle to give up control of a company they built, while decision making at the business may slow down with a board of directors in charge.There have been some bumps in the road, but Schroeder says he is happy with the changes so far at Brightspot, including employee retention and attraction. The entrepreneurial spirit is starting to grow within the company, too. "I now fully expect that some of these employees here will someday leave and actually try to start their own company, which I think is incredible for the Canadian economy," he said.
