Advocacy
Employee Ownership Trusts: A Canada-Strong Solution
Canada needs more employee ownership
Canada’s economy is at a pivotal moment. As business owners retire, succession decisions will shape Canadian ownership, worker opportunity, and economic resilience in communities for decades to come.
- Employee Ownership Trusts keep businesses Canadian-owned
- They empower workers and support long-term growth
- Permanence of the EOT tax incentive is essential to scaling this solution
KEY FACTS: WHY EMPLOYEE OWNERSHIP MATTERS NOW
Succession is a national economic issue
- Canada is entering a historic business succession wave.
- More than $2 trillion in small and medium-sized business assets are expected to change hands over the next decade, as 75 to 80 percent of Canadian small business owners plan to retire or sell within ten years.
- Only a small fraction have formal succession plans.
- Poorly managed succession risks business closures, job losses, and reduced productivity across the economy.
Businesses are being sold to third-parties because it is easier, not because it is better
- When viable succession options are limited, business owners often default to third-party or foreign buyers who can offer immediate liquidity.
- These sales may solve a short-term problem for owners but can result in decision-making and wealth moving out of Canada, weakening long-term economic sovereignty.
Employee Ownership Trusts keep businesses and wealth in Canada
- Every sale to an Employee Ownership Trust keeps a business Canadian-owned.
- EOT-owned companies are significantly less likely to fail and tend to remain rooted in their communities, preserving jobs, local investment, and economic stability.
EOTs work because selling owners are supported
- Selling to an EOT requires owners to take on additional complexity and risk. Transactions are financed over time using company cash flow, often with seller financing.
- International experience shows that EOTs only scale when owners are supported through meaningful tax incentives that recognize this risk.
- Both the United States and the United Kingdom have permanent incentives in place, and both have built large, successful employee ownership sectors as a result.
The right decision for Canada is permanence
- Canada’s current EOT capital gains tax exemption is temporary and set to expire at the end of 2026.
- Market evidence already shows that this limited timeline has discouraged adoption, even as interest grows.
- Permanence is required for employee ownership to move from a niche option to a mainstream succession pathway.
TAKE ACTION
If making Canada’s economy stronger, keeping businesses locally owned, and empowering workers and communities through a low-risk, targeted policy sounds like something you support, we invite you to take action:
Sign our open letter below, calling for the EOT incentive to be made permanent.
OPEN LETTER
Employee Ownership Trusts: A Canada-Strong Solution
To the Honourable François-Philippe Champagne
Minister of Finance of Canada
Canada is at a pivotal moment. As thousands of business owners prepare to retire in the coming years, the decisions we make now will shape who owns Canada’s economy, where wealth is created, and whether communities across the country continue to thrive.
Employee Ownership Trusts (EOTs) offer a proven, community-oriented solution.
Employee Ownership Trusts are an answer to succession. They enable business owners to sell their companies to their employees, and be paid out of company profits over time. They keep businesses Canadian-owned, enable workers to share in the success they help create, and support long-term investment in local economies. They align directly with Canada’s goals of economic sovereignty, worker opportunity, and resilient communities.
Canada has already begun to see the promise of this approach. The country’s first Employee Ownership Trusts are strong, values-driven companies rooted in their communities and focused on long-term success. Financial institutions, advisors, researchers, and workers are beginning to build an ecosystem ready to support employee ownership at scale.
What the market needs now is certainty.
Making the Employee Ownership Trust capital gains tax incentive permanent would unlock broader adoption, support thoughtful business succession planning, and allow employee ownership to become a mainstream pathway.
This is an opportunity for Canada to:
- keep successful businesses in Canadian hands,
- empower workers to build lasting wealth and stability for their families, and
- strengthen productivity, investment, and growth in communities across the country.
Employee ownership has delivered strong results in peer economies such as the United States and the United Kingdom. With permanent policy support, it can do the same in Canada.
We urge the Government of Canada to act swiftly to make the Employee Ownership Trust incentive permanent and embed employee ownership as a durable pillar of Canada’s economic future. This is a practical, forward-looking step that benefits workers, businesses, and communities — and helps ensure a stronger, more resilient Canada.
Signed,
Canadians who believe in shared ownership, strong communities, and a Canada-strong economy
Sign the letter using this form
MORE EVIDENCE THAT EMPLOYEE OWNERSHIP DELIVERS
- Employee ownership has delivered strong results in peer economies.
The United States has more than 6,000 employee-owned companies, generating over $2 trillion USD in worker wealth. The United Kingdom has nearly 3,000 employee-owned companies and more than 250,000 employee-owners.
- Employee-owned companies perform well over time.
Research from the U.S. and U.K. shows higher productivity, stronger growth, and improved resilience during economic downturns compared to peer firms.
- Employee ownership strengthens communities.
Businesses that remain locally owned are more likely to retain jobs, maintain a stable tax base, and reinvest in their communities. Economic development research consistently shows that most new jobs and capital investment come from businesses that already exist in a community, not from new arrivals.
MORE ABOUT THE EOT INCENTIVE
Canada’s Employee Ownership Trust legislation was passed in 2024 and includes a capital gains tax exemption of up to $10 million for qualifying sales to EOTs and worker co-operatives. The federal government has projected the fiscal cost of this incentive at approximately $80 million over the first five years, making it a targeted, low-cost intervention.
This incentive is pivotal. International experience shows that without a meaningful tax incentive, EOTs remain rare and limited to a small number of highly motivated owners. With permanent incentives, employee ownership becomes a scalable, mainstream option that delivers broad economic benefits.
Additional Advocacy Priorities
Recent technical amendments introduced through Bill C-15 have provided greater clarity on the operation of EOTs, addressing key concerns raised by business owners and advisors. These changes strengthen the regulatory foundation of EOTs in Canada and position the model for wider adoption if policy certainty is maintained.
EOC is continuing to pursue reduced technical and administrative barriers to EOT adoption, and ensuring employee ownership legislation remains practical, accessible, and aligned with international best practices.
Our immediate priority is to assess the current state of employee ownership in Canada and to identify and address areas where the EOT legislation specifically can be improved.
GET INVOLVED
Employee ownership in Canada has advanced because individuals and organizations chose to engage. Explore membership, volunteer opportunities, and stay informed as we build a stronger, more inclusive Canadian economy.
