By: Jon Shell and Michael Ras

Originally published in Calgary Herald

In 2024, about 400 companies in the U.K. were sold to their workers using a structure called an Employee Ownership Trust (EOT). That represented about eight per cent of all private company sales in the U.K. Instead of being sold to outside investors or closed, those companies remain domestically owned, keeping jobs in communities and flowing future profits to workers.

As the threat to Canada’s sovereignty intensifies, we need policies that keep Canadian companies owned by Canadians. With many business owners approaching retirement and the Canadian dollar in free fall, Canada faces the risk of a significant sell-off of companies to Americans. Strong employee ownership policies can counter this, with little or no ongoing government intervention, by presenting an attractive alternative to owners looking to sell.

Currently, there are very few employee-owned companies in Canada, due largely to tax and trust laws that have made these kinds of transactions difficult. In June of last year, the federal government started addressing this by introducing an EOT structure and incentives encouraging uptake. The goal is to capture the same proven, positive outcomes seen for employees, business owners and the broader community since the U.K. introduced EOTs in 2014.

However, Canada’s policy is tentative compared to the U.K.’s. Our legislated $10-million capital gains tax exemption is set to expire by the end of 2026, far too soon given the lead time required in a business sale. It also includes several “red tape” provisions that have made it difficult or impossible for some business owners to access.

It’s a typically Canadian “let’s see how it goes” approach, but the time for that kind of dithering is over.

Friesens, a large Manitoba-based publisher and one of Canada’s few employee-owned companies, is currently showing the resilience of the model. They face major headwinds as they export the majority of their books to the U.S., but their CEO recently said, “You’re going to hear about job cuts and factory closures, but not at Friesens. Our objective is to keep our employee-owners as financially whole as we can for as long as we can.”

It’s hard to imagine a U.S.-based owner making a similar commitment.

Employee ownership also has a strong track record in the U.S., where a different version of the EOT (called an Employee Stock Ownership Plan) launched in 1974. Almost 15 million Americans now have share accounts in about 6,500 employee-owned companies, with an average value of about US$120,000. Along with these extraordinary wealth outcomes, these firms are proven to be more resilient in recessions, be more productive, grow faster and keep jobs in local communities. Early data on the U.K.’s EOT shows similar results.

Appealing to Canada’s workers is a clear priority for the Liberals and Conservatives. In the English language Liberal leadership debate, Mark Carney suggested that he would make it a “great time to be a worker in Canada.”

In a January video, Pierre Poilievre said that “instead of turning workers against business owners, we’ll turn workers into business owners.”

Both parties can demonstrate their support for Canada’s workers with platform commitments to extend and increase the EOT tax incentives and to remove unnecessary red tape. On the stump, employee ownership provides a rare opportunity to offer a message of hope that workers and communities can survive and thrive amid economic turmoil.

“We’ll help make you owners” is a hell of a rallying cry.

With Canada’s sovereignty at stake, we must invest in every approach to keeping Canadian businesses in Canadian hands. Simply matching the U.K.’s EOT success would see 300 Canadian companies sold to their workers each year; very few policies promise as powerful an outcome.

Employee ownership was a great idea in 2024. It has become an essential idea for Canada in 2025.

Jon Shell is chair of Social Capital Partners and a Board member of Employee Ownership Canada.

Michael Ras is the CEO of Employee Ownership Canada.

New laws hope to encourage more retiring business owners to sell their business to their employees through Employee Ownership Trusts

(originally published in Future of Good)

Why It Matters

When outside interests take over a small or medium business, manager positions are usually the first to be cut, removing large salaries from communities. Often, the business is purchased then closed, leaving holes in the community. Employee Ownership Trusts help businesses stay in local communities when a business has no successor, and contribute to employee retention and financial wealth.

This journalism is made possible by a partnership with Social Capital Partners. See our editorial ethics and standards here.

Two new federal bills have received royal assent, making it easier for business owners to create Employee Ownership Trusts and share their wealth with employees. 

New incentives will encourage business owners looking to sell to consider an Employee Ownership Trust so employees can have a stake in business ownership. 

Selling the company to a trust means employees do not pay out-of-pocket. The loan is paid off from company profits, and employees begin to receive dividends. 

Nearly three-quarters of small business owners plan to retire in the next decade. 

Advocates have long argued that EOTs have numerous benefits. They allow companies to grow and stay in local communities, contribute to employee retention, and create financial wealth for employees and their families.

Bills C-59 and C-69, which will allow this to happen, received royal assent on June 20. 

Bill C-59, a competition bill, means Canadian business owners will qualify for up to $10 million in tax-free capital gains if they sell most of their company to workers through an EOT. 

Bill C-69 is a financial fairness bill which aims to encourage more business owners to sell to an EOT. 

“It’s a different wealth-building model, but it lifts everybody and creates good economic opportunities,” Arnold Strub, executive director of Employee Ownership Canada, said earlier this year.

“When employees have skin in the game and an ownership mindset, good things start to happen.”

The Government of Canada first read Bill C-59 in the House of Commons, including proposals on Employee Ownership Trusts (EOT), on Nov. 30.

Highlights include extending the capital gains reserve from five to 10 years, a $10 million capital gains exemption, and the ability to use the loan as a tax deduction, all designed to make turning a business into an EOT easier, said Strub.

Broadly, employee ownership meets two crucial goals, said Strub. First, it’s a democratic way for working-class Canadians to acquire wealth. 

Such models are also a retention tool, as employees generally have better compensation and develop an ownership mindset.

“There’s a lot of research from the UK and the U.S. that shows that private companies with some type of employee ownership plan do better,” said Strub.

One employee ownership success story can be found in the Canadian prairie town of Altona, Man. where Friesens Corporation has 600 employee-owners in a town of 4,300 people. Established in 1907, the company evolved into four divisions offering trade books, academic annuals, packaging and self-publishing assistance.

In the 1950s, the owners began investigating new ownership models once they knew no next generation would take over. Influenced by the co-operative movement, they started gifting shares to employees who, for a time, could exchange them on a private market. About 30 per cent of the staff owned all of the shares.

That worked until the early aughts when Friesens created an EOT since more people were retiring than purchasing shares. 

Now, every employee is an owner, and every employee is a beneficiary.

“Over the last 12 months, we’ve distributed in the neighbourhood of $5.5 million in proceeds to our employee-owners,” CEO Chad Friesen said in January.

“On average, our employee-owners received over $10,000 of what we would call an EOT distribution.

“We feel that our model is the great equalizer in business. It doesn’t matter whether you’ve come from an affluent family down the road or you’re a newcomer who’s arrived here from the Philippines. You both have an equal opportunity within this company to take advantage of ownership benefits.”

The Canadian Employee Ownership Coalition came together 18 months ago to advocate for better incentives to boost employee ownership in Canada. 

With files from Tony Zuchra