Imagine a scenario where Canadian businesses are choosing to empower their employees as owners rather than selling out to foreign interests, particularly those from the United States. This bold move is not just about retaining control but also about fostering a sense of community and loyalty within the company. But here's where it gets intriguing: What if this trend could reshape Canada's economic landscape, especially as the nation grapples with a wave of retiring baby boomer entrepreneurs and a trade war with its southern neighbor? Let’s dive into this fascinating shift and explore why it matters.
Aaron Schroeder, founder of Brightspot Climate, found himself in a unique predicament. Despite not actively seeking a sale, his Vancouver-based engineering consultancy was inundated with offers, primarily from larger U.S.-based companies and hedge funds. When the time came to consider his company’s future, Schroeder made a groundbreaking decision. Instead of selling to the highest bidder, he established an Employee Ownership Trust (EOT), effectively turning all 40 of his employees into owners. And this is the part most people miss: He did this without requiring any upfront financial investment from his staff, ensuring inclusivity and shared success.
Employee ownership isn’t a new concept in Canada, but the federal government’s 2024 amendment to the Income Tax Act introduced EOTs as a novel option. Since then, four companies, including Brightspot, have embraced this model. This shift comes at a critical juncture, as Canada faces the retirement of thousands of baby boomer entrepreneurs, representing over $300 billion in revenue at stake over the next five years. According to the Business Development Bank of Canada (BDC), there are approximately 100,000 entrepreneurs over 65 in the country, making the timing of EOTs particularly significant.
But here's where it gets controversial: While EOTs offer numerous benefits, they also present challenges. For instance, owners may need to accept a lower sale price compared to selling on the open market, and they must wait longer to receive full payment. Additionally, employees, though owners, do not directly manage the company, which can lead to misconceptions about their role. And this is the part most people miss: The success of an EOT often hinges on the generosity and long-term vision of the owner, as well as the financial literacy of the employees.
To incentivize this transition, the federal government introduced a temporary $10-million capital gains tax exemption for owners selling to employees. However, this incentive expires at the end of 2024, leaving a narrow window for companies to act. Tiara Letourneau, CEO of Rewrite Capital Advisors, emphasizes the urgency: 'Companies need to start the process now or risk running out of time.' Without this tax break, the future of EOTs in Canada remains uncertain, sparking debate about whether the government should extend the incentive.
Nikki Barrett, CEO of Grantbook, a Toronto-based company, faced a similar dilemma when a co-founder wanted to sell. With many employees unable to afford buying the company outright, Barrett turned to the EOT model. 'This is exactly what we were looking for,' she said. Grantbook became Canada’s first EOT in 2025, proving that this model can work even in complex situations. However, Barrett acknowledges that it’s not a one-size-fits-all solution. Some entrepreneurs may struggle to relinquish control, and decision-making can slow down with a board of directors in charge.
Despite these challenges, the benefits of keeping businesses local are compelling. Justine Janssen, executive director of Employee Ownership Canada, argues, 'From a purely economic perspective, it’s a no-brainer to incent business owners to keep their businesses local.' This sentiment is echoed by Schroeder, who values maintaining Canadian ownership and culture within his company. He even envisions his employees starting their own ventures in the future, contributing to Canada’s entrepreneurial ecosystem.
Here’s a thought-provoking question for you: As Canada navigates this economic transformation, should the government extend the tax incentive to encourage more companies to adopt the EOT model? Or is it better to let market forces determine the future of employee ownership? Share your thoughts in the comments below, and let’s spark a conversation about the future of Canadian businesses.
