Some Canadian companies are choosing a unique path as they prepare for the future. Instead of selling out to U.S. firms, they are turning their employees into owners through employee ownership trusts (EOTs). This move, especially popular among businesses with baby boomer entrepreneurs nearing retirement, is being driven by a tax incentive introduced by Canada’s federal government in 2024. However, this tax break is set to expire at the end of the year, making the future of EOTs uncertain.
Aaron Schroeder, the founder of Brightspot Climate, a Vancouver-based climate engineering firm, chose this path when he was ready to retire. Instead of selling the business to a larger company or hedge fund, often based in the U.S., Schroeder established a trust that made his 40 employees owners. “I wanted to have a model where everyone could participate, but nobody had to pay up front,” Schroeder said.
How Employee Ownership Trusts (EOTs) Work
An EOT works by the trust purchasing the company’s shares on behalf of the employees. The owner is paid over time using the company’s profits, and employees receive profit-sharing instead of direct ownership payments. This setup allows the employees to take ownership without any upfront costs.
The biggest benefit is that employees gain a stake in the business, ensuring they are invested in the company’s success. However, the challenge is that founders may have to sell for a lower price compared to selling to outside buyers.
The Growing Popularity of EOTs in Canada
Since the introduction of the EOT model in 2024, a handful of Canadian companies have made the switch. In 2025, Grantbook, a Toronto-based company with 50 employees, became the first Canadian business to fully transition to employee ownership.
The EOT model has gained attention due to its benefits for both the employees and the broader economy. However, the tax incentive expires soon, which could limit the growth of EOTs in Canada.
Challenges and Benefits of EOTs
EOTs bring several advantages, but they are not without challenges. One issue is that employees may lack the management skills needed to run the business. The model also requires a high level of financial literacy from employees. Despite these challenges, companies like Brightspot Climate have seen improvements in employee retention and entrepreneurial spirit within the company.
Experts hope the Canadian government will extend the tax incentive to help keep businesses local. “It’s a no-brainer to incentivize business owners to keep their companies in Canada,” said Justine Janssen, executive director for Employee Ownership Canada.
For Schroeder, the move to employee ownership has been a success. “I now fully expect that some of these employees will leave and start their own companies, which I think is incredible for the Canadian economy,” he said.
