Why some Canadian companies are turning their workers into owners instead of selling to the U.S.

Aaron Schroeder's company wasn't for sale, yet the offers kept coming.

For years, the Vancouver-based climate engineer received a few unsolicited bids every month, sometimes a couple every week. The offers were often from larger companies and hedge funds, especially those based in the United States.

When Schroeder was ready to sell Brightspot Climate, an engineering consultancy with offices in Vancouver, Calgary and Toronto, he decided to go in a different direction and create a special trust to make all 40 of his staff owners.

"I wanted to have a model where everyone in the company could participate, but nobody has to pay any money up front," he said.

Different types of employee ownership have existed in Canada for decades, but in 2024, the federal government amended the Income Tax Act to introduce a new option called an employee ownership trust (EOT).

Since then, four companies have made the switch, including Brightspot.

The new type of ownership comes at a time when the country is facing a wave of baby boomer entrepreneurs nearing retirement and an increased focus on strengthening the national economy in the face of a trade war with the U.S.

Schroeder says he wanted to reward the employees that helped build the business. He also feared a sale would result in job losses and would erode the company.

"If we'd sold out to a U.S. company, all of our [intellectual property] and our culture would become American. We'd be working for an American company," he said. "I do see a huge value of keeping small businesses Canadian."

An EOT is a trust that holds the company's shares on behalf of the employees. The trust finances the purchase of the company and the owner is paid back over time using profits generated by the company. The employees don’t buy shares, but there is profit-sharing.

For the companies considering becoming an EOT, time is of the essence. The federal government offers a tax break for owners who sell their businesses to employees, but the incentive runs out at the end of this year.

Without the tax incentive, the future of EOTs in Canada is uncertain.

"There is this hard cutoff deadline," said Tiara Letourneau, CEO of Rewrite Capital Advisors, a Vancouver-based consultancy that is working with about a dozen mid-sized private corporations that are interested in becoming employee ownership trusts. 

"Because companies need a long time to do it, having that cutoff means that they pretty much need to have started now or they're running out of time," she said.