Employee Ownership Trusts: A Guide To Structuring And Settlement

Between January 1, 2024 and December 31, 2026, business owners can access significant tax benefits when selling a qualifying business to an employee ownership trust ("EOT") pursuant to a transaction that constitutes a qualifying business transfer. Among other benefits, eligible vendors are entitled to receive a shared pool of up to $10 million in capital gains deductions (the "EOT Deduction").

This article covers the following topics:

1. Qualification Requirements for EOTs;
2. Distribution Structures for EOTs; and
3. Qualification Requirements for EOT Transactions.

Generally speaking, an EOT is an irrevocable trust resident in Canada whose only assets comprise qualifying businesses subject to certain conditions concerning beneficiaries, trustees, distributions, and fundamental decisions. Unlike traditional ownership models, where shares are owned by individual shareholders, an employee ownership trust model allows the employees of a business to benefit from the