Aaron Schroeder’s firm was consistently approached with acquisition offers despite not being on the market. The Vancouver-based climate engineer received numerous unsolicited bids monthly, often from larger corporations and hedge funds, particularly those in the U.S.
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 obligations.
Employee ownership models have existed in Canada for years, but in 2024, the federal government amended the Income Tax Act to introduce a new option known as an employee ownership trust (EOT). Since then, four companies, including Brightspot, have transitioned to this model.
The rise of EOTs in Canada coincides with an impending retirement wave among baby boomer entrepreneurs and a focus on bolstering the national economy amidst trade tensions with the U.S.
Schroeder aimed to reward his dedicated employees and prevent potential job losses and cultural dilution that might have occurred with a sale to a U.S. entity. He emphasized the importance of preserving Canadian small businesses.
An EOT is a trust that holds a company’s shares for employees, allowing them to benefit from profits without purchasing shares directly. The government’s tax break for selling to employees is a time-sensitive incentive, with the deadline approaching at the year’s end.
The shift to EOT ownership offers benefits, such as aligning employees with the company’s goals, but also presents challenges, including the need for financial literacy and potential slowdown in decision-making processes.
Overall, the adoption of EOTs in Canada is growing, with more companies expected to make the transition. The potential extension of tax incentives by the government could further encourage businesses to keep ownership local, contributing to the country’s economic stability.