Budget 2023: Employee Ownership Trust Measures Unveiled

Consistent with the Federal Government's (the "Government") prior statements in Budget 2022, Budget 2023 proposes amendments to the Income Tax Act (Canada) (the "Tax Act") that will, according to the Government, facilitate the use of "Employee Ownership Trusts" or "EOTs" to acquire and hold shares of Canadian businesses and thereby enable participating employees to "share in the success of their work" and provide them with an opportunity to "receive their share of profits".

An Employee Ownership Trust is commonly understood to refer to a trust that holds shares of a corporation for the benefit of the corporation's employees. Such vehicles have been utilized with some measure of success in other G7 countries in recent years, most notably in the United States and Britain, for purposes of allowing the employees of a corporation to acquire shares of the corporation without being required to pay for the shares directly with out-of-pocket funds. For business owners, an