When the federal government made the Employee Ownership Trust (EOT) $10 million capital gains tax exemption permanent in April 2026, it was big news and rightly so. EOTs deserve the spotlight. But in the excitement, it’s easy to overlook a broader truth: employee ownership in Canada is much bigger than any single model.
From construction giants to solar companies to a Quebec cooperative crafting Carnival mascots, Canadian businesses have been sharing ownership with employees for decades. The EOT is a powerful new tool in the toolkit, but it’s one of four distinct models available to business owners today. And depending on your goals, your industry, and your timeline, a different approach might serve you better.
Here’s a look at the full picture.
Employee Ownership Has Deep Canadian Roots
McElhanney, Canada’s oldest employee-owned engineering firm, has been doing this since 1910. PCL Construction, EllisDon, Chandos, and more have all applied employee ownership to their advantage for decades, before the EOT framework existed.
What they had in common wasn’t a specific legal structure. It was a belief that the people who help build a business deserve a stake in it. Today, Canadian owners have more tools than ever to act on that belief.
The Four Models, Explained
1. Employee Ownership Trust (EOT)
The newest model and, right now, the one with the most favourable tax treatment. In an EOT transition, the owner sells a minimum of 51% of shares to a trust and the employees become the trust beneficiaries, not direct shareholders. The permanent $10M capital gains tax exemption makes this a financially compelling option for qualifying sellers.
EOTs work best for mature, profitable, cash flow stable businesses. Transitions typically take a year or more and require financial planning, including financing the sale. The typical first step is to reach out to a plan designer with EOT expertise.
“If we’d sold out to a U.S. company, all of our IP and our culture would become American.”
— Aaron Schroeder, Brightspot Climate (completed an EOT transition, making all 40 staff owners)
2. Employee Share Ownership Plan (ESOP)
ESOPs are one of the most flexible forms of employee ownership. Employees purchase or earn shares over time through payroll deductions, bonuses, or vesting arrangements. Plans can cover a handful of key leaders or extend to the entire workforce.
ESOPs can start as minority ownership and grow into full employee control. They are a strong tool for owners who want to reward and retain their people, build a culture of ownership, and transition gradually on their own terms.
SkyFire Energy, a Certified B Corp delivering solar projects across Western Canada, implemented a broad-based ESOP in 2018 as a way to reward employees and drive exceptional service. Today, 55 of their 160 staff are employee-owners.
“We see it as a real strength of our business. It’s been a real cornerstone to our success.”
— David Vonesch, CEO, SkyFire Energy
3. Worker-Owned Cooperative
In a worker cooperative, each member buys one share and holds one vote, regardless of tenure or pay. Profits (called surplus) are distributed based on participation, typically hours worked. This model prioritizes workplace democracy and equitable wealth-sharing above all else.
Co-ops are an especially strong fit for deeply collaborative teams who want not just ownership, but active governance roles.
When Promo Plastik’s division faced closure in 1992, a group of employees in Saint-Jean-Port-Joli, Quebec stepped up and bought the company, converting it into a worker cooperative. More than 30 years later, the co-op is still crafting Canadian-made promotional products (including the iconic Bonhomme figurine of the Quebec Winter Carnival) and distributing across North America.
4. Phantom Equity Plan
Phantom equity mirrors the economics of ownership without issuing actual shares. Employees receive cash payouts linked to enterprise value, profit growth, or a liquidity event, but the ownership structure stays the same and employees do not own equity in the company.
For some owners, phantom equity is the starting point: a way to create alignment and retention while preparing for a fuller transition through an ESOP or EOT later. For others, it’s a permanent tool for rewarding key leaders without the complexity of issuing shares.
The Right Model Depends on You
There is no single right answer. Business owners can choose from EOTs, share ownership plans, worker cooperatives, phantom plans, or a hybrid of several, depending on their business, their goals, and their people.
What they share is this: every model offers a path to a more resilient, values-aligned business. One that keeps ownership local, rewards the people who helped build it, and keeps Canadian businesses Canadian-owned.
Want to explore which model might be right for your business?
→ Connect with a trusted EOC service provider to discuss your options.
→ Attend an upcoming EOC webinar or Conference.
This post is for general informational purposes only. Always seek qualified legal, tax, and financial advice.