Aaron Schroeder’s firm, despite not being on the market, consistently received acquisition offers. The Vancouver-based climate engineer was approached with unsolicited bids from larger corporations and hedge funds, mainly from the U.S., multiple times per month. Eventually, when Schroeder decided to sell Brightspot Climate, an engineering consultancy with branches in Vancouver, Calgary, and Toronto, he opted for a unique approach. He established a special trust to make all 40 of his employees owners without any upfront financial burden.
In 2024, the Canadian government amended the Income Tax Act to introduce the employee ownership trust (EOT) option. Since then, four companies, including Brightspot, have transitioned to this new ownership structure. This shift aligns with a period where Canada is grappling with an aging population of baby boomer entrepreneurs nearing retirement and heightened efforts to bolster the national economy amidst trade tensions with the U.S.
Schroeder’s motivation for employee ownership stemmed from a desire to reward his dedicated staff and maintain the company’s Canadian identity. He believed that selling to a U.S. entity would jeopardize their intellectual property and organizational culture. The EOT model, where a trust holds company shares for employees, provides a way for owners to be repaid gradually using company profits, without staff having to purchase shares directly.
For businesses considering EOT conversion, time is of the essence due to a tax break ending at the year’s close. Without this incentive, the future of EOTs in Canada remains uncertain. Justine Janssen, from Employee Ownership Canada, anticipates 20 to 30 more companies adopting EOTs this year, emphasizing the importance of incentivizing local business ownership for the country’s economic stability.
While EOTs present benefits like shared ownership and potential tax advantages, challenges such as succession planning and financial literacy among staff exist. Despite hurdles, companies like Brightspot and Grantbook have seen positive outcomes in terms of employee engagement and business sustainability. The shift towards employee ownership is fostering a culture of entrepreneurship within these organizations, potentially benefiting the broader Canadian economy in the long run.
