Succession Planning

When you have built a business you are proud of, the decision to exit may be one of the hardest decisions you will ever make. However, succession planning is one of the most key strategies business owners must put in place.

Employee Share Ownership Plans (ESOPs), whether structures as equity, stock option, phantom stock or EOTs, are the ideal way for small to medium-sized Canadian business owners to create a succession plan that allows you to realize your earned value while leaving the company you built ready to grow in the hands of your employees. They are also shown to provide a number of additional benefits; increased retention, engagement, productivity, and profit, spreading the wealth more fairly and protecting local businesses.

You don’t have to either close your business, or sell to a stranger. Selling shares to employees offers a win-win solution. We can help you design a three-point exit strategy and succession plan and would always tailor the plan to the unique company and owner.

We ensure:

  1. You get your value out
  2. Your company can sustain itself in the future
  3. Legacy. Preserve the values and ideology your company was built on.

See how a small environmental consulting firm set up their ESOP. Enviro-Stewards Case Study


The Employee Ownership Trust (EOT) structure is in place to provide another alternative for business owners wishing to sell their company to employees as part of their succession planning activities.

What kind of owner is an EOT for?

  • wants to exit in a very short time frame (immediate to 1 year)
  • desires to sell control (51%) to the employees
  • would like all employees to have the opportunity to participate (broad-based eligibility)
  • has a stable business generating reliable profits

Why consider an EOT?

  • transition ownership to employees 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
  • there can be a time worked requirement before employees become eligible
  • employees benefit through the trust and receive profit distributions
  • employees may be able to receive equity payouts for their proportional account in the trust when they leave the company (which may have tax advantages subject to certain criteria being met)
  • 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

What to keep in mind

Since there are multiple ESOP models available (equity, stock options, phantom stock, and EOTs) it is important for the owner to first assess their goals and the pros and cons of each option in order to determine the best fit. We can help through the Feasibility Audit Stage of our three-stage model.

  • 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
  • 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

Our commitment to you: A tailored plan, communicated and implemented well. To learn more about what an ESOP succession plan could look like, contact us today.