Aaron Schroeder, the founder of Brightspot Climate, found himself inundated with offers to buy his company despite not actively seeking a sale. Over time, he regularly received unsolicited bids, particularly from larger firms and hedge funds based in the U.S. When Schroeder eventually decided to sell Brightspot, he opted for a unique approach by establishing a special trust to make all 40 of his employees owners without requiring any upfront payment.
The concept of employee ownership trusts (EOTs) is not new in Canada but gained traction in 2024 when the federal government amended the Income Tax Act to introduce this new ownership model. Brightspot Climate was among the four companies that transitioned to this structure. The rise of EOTs coincides with a significant demographic shift in Canada, with many baby boomer entrepreneurs nearing retirement and a growing emphasis on bolstering the national economy amid trade tensions with the U.S.
Schroeder’s motivation behind adopting the EOT model was to reward his dedicated employees and preserve the company’s Canadian identity and culture. He believed that selling to a foreign entity would risk losing their unique intellectual property and essence. The EOT setup involves a trust holding the company’s shares on behalf of employees, allowing them to benefit from profit-sharing without purchasing shares directly.
With a looming deadline for the tax break offered by the federal government to incentivize owners to sell to employees, companies considering the EOT structure face time constraints. Failure to act promptly could jeopardize the future viability of EOTs in Canada. Experts emphasize the potential benefits of EOTs, such as preserving local businesses and fostering employee engagement, while acknowledging the challenges, including the need for financial literacy among staff and potential leadership transitions.
As more companies explore the EOT model, there is optimism about its continued growth, with expectations of additional firms transitioning to this ownership structure. The success stories of early adopters like Brightspot Climate and Grantbook highlight the positive impact of EOTs on employee morale, retention, and overall business performance. Despite some hurdles along the way, the shift towards employee ownership is seen as a positive step towards fostering entrepreneurship and economic growth in Canada.