What to know about the new EOT in Canada

Employee Ownership Trust (EOT) is in Canada

Canadian business owners may be curious about a possible new option when considering an employee ownership transition; the EOT. 
Employee Share Ownership Plans in Canada have been used by business owners as they are shown to facilitate numerous benefits; increased retention, engagement, productivity, and profit. They can also improve the country’s economy by spreading the wealth more fairly, protecting small businesses and local work, and improving resiliency of these businesses. 
The government had previously announced the creation of an Employee Ownership Trust (EOT) in the 2023 budget and have now confirmed it’s creation in the Fall Economic Statement along with announcing tax incentives for business owners who decide the EOT is a fit for their goals. New EOT legislation can hopefully be a positive contribution to employee ownership in Canada.
While the legislation is still yet to be finalized, here is a breakdown of the Pros and Cons as we know it today.


  • transition ownership to employee via a trust
  • until 2026 the first $10 million of capital gains realized on the sale are exempt from tax (subject to certain conditions)
  • employees don’t have to invest any money, if they meet the eligibility criteria, they are beneficiaries of the trust which owns the shares
  • employees benefit through the trust and receive profit distributions
  • offer a form of compensation on top of more traditional compensation and bonus plans
  • extend the timeframe of the capital gains reserve for the business owner


  • owner must sell a controlling stake in the company to the trust
  • delayed financial return for the owner as the proceeds come from company profits over the years
  • employees don’t actually own shares and therefore it will be more difficult to fully create an ownership culture 
  • requires ongoing education and communication to employees
  • must manage employee expectations as to what participating in the EOT means to them personally and in relation to their roles and responsibilities
  • no tax incentives to the employees
  • requires an employee group that has people in it that can take the reins of the business (or hiring someone), given the limited participation in the business allowed for the seller, post sale

Complete a Feasibility Survey through our website to see what kind of employee share ownership plan can work for you and your company. 

Recognition and Culture to create Engagement

As a business owner, you know how important it is to attract and retain top talent, so you’ve created an employee share ownership plan; recognition and engagement are important. This can be a great strategy to offer recognition of employees’ efforts in order to increase engagement and retention.

Recognition and Engagement

I recently read an article in Benefits and Pensions Monitor called “How recognition bolsters engagement and shields employees from burnout”, which indicated a few things that align with ESOPs. A report from Workhuman and Gallup, ‘Empowering Workplace Culture Through Recognition’ shows employees who believe that recognition is an important part of their organization’s culture are 3.7 times as likely to be engaged, 3.8 times as likely to feel connected to their culture, and half as likely to experience frequent burnout as those who do not. ESOPs can lead to greater company performance if the company can engage their workforce (recognition and engagement). This comes down to what the report is saying about recognition and culture “the research highlights crucial considerations for leadership in reinforcing strong organizational cultures.” Without building a strong foundation in the culture, programs and initiatives like ESOPs or more traditional recognition plans likely won’t see the success you desire.

According to the article, a very small number (34 percent) of employees say their employer has a recognition program in place, only 13 percentage of which rate it as excellent. What seems to be the key here is aligning recognition program with the values of the organization as employees who perceive that to be the case are 4.9 times as likely believe they know what is expected of them at work. This is also a key element within ESOPs and the plan is more likely to be successful when employees understand why the ESOP was put in place, how it aligns with the company’s values, or how they individually impact company success in their everyday work (again recognition and engagement).

“Employee engagement is critical to the productivity, morale, development, and retention of every organization’s workforce.”


Making the most out of your plan can be challenging

We offer ESOPlus®, which is designed to provide detailed tools and resources to support the ESOP after it has launched. These are designed to improve activities that establish an ownership culture and drive Plan success such as engaging employees and establishing participative practices. It is ideal for Plans that are meant to be ongoing, drive higher engagement from employees, attract new talent, retain team members, and support succession planning.

ESOP companies that have established an ownership culture through participation and engagement are more likely to see positive results like higher productivity, innovation, retention, engagement, and profits.

What’s included in ESOPlus®?

  1. An engagement measurement tool (CORE4ESOP) to help you track and analyze Plan performance and ensure it is meeting its goals.
  2. Templates and guides that are detailed, clear, engaging, and customizable to help integrate your Plan into other company strategies such as attracting and retaining employees.
  3. Workshops along with direct access to an ESOP expert to assist the ESOP Committee and employee shareholders as a whole to truly engage and participate in ownership.
  4. A workbook with templates for you to establish your Plan Committee and communication strategy, and set them up for success long-term.
  5. Administration guides and third party portal access for employee visibility of company ownership
  6. Exclusive access to the most recent and relevant data specifically from small and medium sized private Canadian companies that have an employee ownership program.

All with access to your own ESOP advisor.

Learn more about the benefits of employee share ownership and how ESOPlus® can help you effectively administer your ESOP by visiting the ESOPlus® page or booking a call.

Employee ownership interest is surging

July 18, 2022: FriesenPress announces ESOPs in Canada now a bestseller as many search for employee ownership information in Canada.

More and more business owners are reading about Employee Share Ownership Plans or ESOPs. ESOPs can be a smart way to sell your company and a great way to attract the best employees. Owners and professional advisers are turning to the practical guide, ESOPs in Canada, to learn more about how to sell to employees successfully and employee ownership in general.

Interest in employee ownership got a boost in February when Budget 2022 stated that the federal government plans, “to create the Employee Ownership Trust—a new, dedicated type of trust under the Income Tax Act to support employee ownership.” Back in 2021, the federal government began engaging stakeholders about barriers to creating these trusts. The government now needs to finalize the new tax rules.

Perry Phillips, co-author of ESOPs in Canada: How to Implement an Employee Share Ownership Plan to Grow and Exit Your Business with Your Legacy Intact, says,

“Employee ownership is a solution to some of the biggest challenges facing the Canadian economy. Baby boomers are exiting their businesses. Companies need to attract talented people who can help them become innovative and productive. ESOPs make that possible.”

Learn more about ESOPs in Canada or Buy Now
CONTACT Joanna Phillips, Vice President, ESOP Builders Inc.
PHONE 647.881.8532
EMAIL joanna@esopbuilders.com

How mini markets maintain a participative culture in an ESOP

Whether it be for a down payment or university tuition of a dependant we all run into larger than life expenses from time to time. When it comes to an ESOP, a mini market can often help deal with these issues. In an established ESOP the Plan Administrator (typically the Board) has the discretion to create in the future an internal market for share trading where ESOP shares may be bought and sold. This is referred to as the Mini market.

If implemented, it would be open to employees who own ESOP shares. Trades would be administered by the Company in order to facilitate the buying and selling of shares. The share trading price will be the annual share value, the FMV as calculated by the most recent valuation. The details of the structure would be provided at the time of implementation.

In a survey EBI conducted, 80% of the respondents utilize mini markets in their ESOP.

Of those, 90% offer the mini market annually. Most found their mini markets to be moderately successful in terms of what their employees wanted. Many saw their employees wanting to buy and sell multiple times a year and others found there were too few shares to produce liquidity in the mini market. These responses were collected in 2018. Like many aspects of the ESOP the mini market requires participation to be successful. Utilizing the mini market allows employees to buy and sell as they need, within the specified timeframe of course. Mini markets don’t have to be an annual event either; it can be at the discretion of the board or the participatory engagement of the employees. Your mini market can be when you decide based on demand and your comfort level. The mini market is designed to allow some liquidity for employees as well as an opportunity to increase their investment in the Company (subject to any caps).

The mini market furthers a participative culture by involving the employees in the process of buying and selling and the excitement that creates. It also raises to employees the importance of investing in their futures, which is ultimately in line with the growth of the company (appreciation in share value). It creates an atmosphere of ownership that can only come from owning shares. Further the sale of the shares to other employees (not the company) by way of the mini market may make the shares eligible for the Long Term Capital Gains Exemption (LCGE) making the sale gains tax free to the employees.

By Colleen Johe, Employee Ownership Specialist & Perry Phillips, President 

Predictability in your ESOP

Social psychologists say that the root of organizational trust is predictability. Surprise is the opposite of predictability, and although it is impossible to eliminate surprises, company leaders should make it their personal goal to never be the source of an unnecessary surprise. Companies can reduce surprises and be more predictable in a number of ways, all of which have the impact of increasing levels of trust.

Communication cycles: Many employee-owned companies communicate in a series of interlocking cycles. They send weekly (or daily) email updates about the state of the company. They have monthly department meetings, quarterly newsletters, and annual shareholder meetings. They have elections every July for their employee committee, a guess-the-stock-price contest every May, and a state of the company address from the CEO every February! The information itself is useful, but maybe even more important, these cycles become expected, and when people’s expectations are met, trust builds.

Open-book management: The better people understand the business, the less likely they are to be surprised. Teaching business literacy and sharing key financial information not only makes people feel like insiders and helps them manage their day-to-day decisions, it also lets them better see the road ahead.

Anticipate problems: What does a business downturn look like and what can we expect in response? Some ESOP companies have built themselves business contingency plans. Such a plan could describe, for example, a “stage 1” downturn in terms of a specific threshold of revenues, EBITDA, projects “in the pipeline,” or product development. The contingency plan, if business is soft, will let people know what needs to happen to the numbers to get out of stage 1, and the warning signs that the business may be approaching a “stage 2” downturn, or worse. One of our clients called their contingency plan “What happens if Ted gets hit by a bus?”, Ted being the founder and president and the main source of revenue. 

An ESOP alone creates conditions for success, however the routine communication practices are one of the important components of a successful plan because it builds trust.

By Joanna Phillips, CHRL, CVB, Vice President, and Perry Phillips CPA, CA, CBV, President

Every new ESOP requires Participation to be successful

As ESOP Experts we write about participation a lot when it comes to ESOPs. Our whole design and implementation methodology is based around a participative approach, and that’s no coincidence. But what does participation look like? Does it always mean representation on the Board of Directors?

Where a goal of the ESOP is an overhaul or integration of the company’s corporate culture, a significant factor could be whether or not employee-owners should have a right to representation on the board of directors. In a unionized company the unions usually require that representation, if they are to look at an ESOP as a means of supplementing wage concessions. Because ESOPs are put into place as a means to allow employees to participate in the value growth of the company, there is a tendency to develop the right of the employee-owners to representation on the board of directors. This is generally done over time as the shares owned by employees becomes about 40% or greater. Studies in the United States have shown that a majority of companies, after five or six years of operating the ESOP, tend to appoint employees to the board, as all stakeholders begin to understand and respect the issues that are involved in running the corporation, and trust each other to do what is best for the growth of the company.

One of our clients decided that board representation was important to their company culture. They decided that one board member would come from among the employee-owners and would have a term of three years. To select this board member, the employee-owners voted for one of three candidates chosen by the founding owners. 

A successful ESOP is flexible and adapts with the changing needs of the growing company. In this way the level of participation can change as the plan grows and employee-owners show greater understanding of what is involved in running an organization.

By Joanna Phillips, CHRL, CVB, Vice President, and Perry Phillips CPA, CA, CBV, President

You have an ESOP; now what?

You have an ESOP; now what? ESOPs in Canada

Putting in place a new plan, any plan, is always only the first step; it never runs itself. ESOPs are no different. It is not a set it and forget it tool.
The ESOP transaction is over and has been well received; now the cultural transformation begins. The initial euphoria provides momentum for the work ahead, but how do you harness it into meaningful actions? Employees may be hesitant and uncertain about how to go about this. It is up to the board of directors and/or the leadership individual(s) to channel this new entrepreneurial energy and focus it on the goals of the corporation. The goal for the ESOP team is to instill a participative culture where the new employee-owners start to act and think like owners. The four areas of interaction with its employees are ownership, participation, training, and information. A challenge for companies transitioning to a true ESOP culture is how to communicate it in a meaningful way. There are many types of corporate information to be shared, including strategic, tactical, and investments. However, the one most commonly shared is company financial information. Some of our clients wonder, so be reassured: specific personal information about salaries is never disclosed.
The continuum of sharing of financial information stretches from sharing NO financial information to FULL transparency based on financial statements. In practice what does this look like? One of our clients decided to share quarterly and year-end financial statements with all employee-owners. To do this, they held town hall meetings quarterly, with highlights of company performance, and annually on a more expansive basis. Those attending were advised that the proceedings were to be kept confidential. At the annual meetings, summarized, condensed financial results were shown on the screen as the presenter explained them and answered employees’ questions. No personal identifying information was shown, no printed material was made, and no electronic material was distributed. However it allowed the new employee-owners to participate at a higher level than pre-ESOP and communicated important information in a way that employee-owners could make a meaningful connection to the results of their day to day work.

By Joanna Phillips CHRL, CVB, Vice President and Perry Phillips, CPA, CA, CBV, President

Employee Engagement is Affected by Neuroscience

What is the foundation for effective employee engagement within your ESOP?


Actually, trust is the foundation for every relationship, in any area of your life.  And the only way to create a workplace environment for greater connection, collaboration, innovation, creativity, and success, is by building incrementally higher levels of trust every day.

A basic understanding of neuroscience can allow us to have a simple, understandable dialogue about some of the elements that instill trust, employee engagement, and can lead to an even more successful Employee Share Ownership Plan (ESOP).

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Thinking of a Stock Option Plan for your Company?

When business owners think of offering their employees equity in the company, a stock option plan often comes to mind.

Stock options can be a great tool for owners to engage their employees and attract and keep talented staff. So let’s discuss what stock options are, and in what scenarios they perform best.

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B Corps and ESOPs – Best of Both Worlds

Updated December 2022

A new business certification called B Corp is becoming a leading business innovation, and the model works extremely well with an ESOP. B Corp

B Corp companies have a mission to maximize “stakeholder value.” Stakeholders include employees, community and the environment, in addition to shareholders. Consider it like certification of a LEED building or Fair trade coffee, but for companies.

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Does Happiness Create Success in Business?

In a meta analysis of 225 academic studies by Sonja Lyubomirsky, Laura King and Ed Diener (as reported in the 2012 Harvard Business Review) it was shown that happy employees have a higher productivity rate by 31%, increased sales by 37% and are 3 times more innovative and creative.

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Should You Make The Scary Switch To Employee Share Ownership (ESOP)?

Should you make the scary switch to an ESOP?  Or is it a scary switch?Employee Share Ownership - is it scary?

There is often a perception that inviting employees into the ownership circle can  take away value, rather than adding value to a company.  When designed well, this is not true at all. In fact, there are many huge advantages for the owner, the company and the employee team.

Tema Frank of Frank Reactions interviewed Employee Ownership Specialist, Dan Ohler, from Edmonton, AB to explore these questions.

We invite you to grab a cup of coffee, put on your headset, and enjoy the interview.

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Employee Ownership. Is It Right For You?

In our daily conversations with business owners and senior management, we receive lots of questions about employee ownership of business through an ESOP.  Most fit into two categories characterized as:

  1. How do we implement an ESOP?
  2. We’ve got an ESOP. How do we keep it fresh and alive?

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Is it the Right Time for Canadian Employee Ownership?

It is no secret that our Canadian economy is changing. How does this relate to Canadian employee ownership?  A great question.

In Alberta, as in many other places across Canada, thousands of oil-related jobs have been lost. Downtown Calgary was almost impossible to drive through a year ago, yet now, rush hour is quite manageable – and it’s not because people are riding bikes.

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ESOP plans in agriculture too

Employee Share Ownership Plans in Canada are often thought to work best in industries such as engineering, construction, high-tech, and famous little airline companies like the one based out of Calgary, AB.  Any guesses?

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