Wesley Novotny speaks with Canadian Lawyer about Employee Ownership Trusts (EOTs) and Bennett Jones work for Grantbook—one of the very first Canadian business to be sold to an EOT. The EOT structure allows employees to become the indirect owners of a qualifying business.
Wes comments in the story along with Peter Deitz, co-founder of Grantbook, about the process and what’s in store for EOTs in Canada.
Wes says for the sale to an EOT to make sense, the company must be the right size and have solid cash flow and values aligned with this exit strategy. “You must have an empowered management and an employee group that can take over” ownership of the business.
While Grantbook’s EOT is Canada’s first, Wes says he expects more of these deals in the future. One important reason is the newly introduced capital gains tax deduction worth $10 million to vendors who sell ownership to an EOT.
The deduction only stands through 2026, however, and succession takes years to plan. “There's a big momentum to get that incentive pushed out to be indefinite past 2027,” Wes says. “I think we need that to happen for this to become a snowball.”
More information on the rules and benefits of EOTs is available on Bennett Jones website. The firm has been advising on EOTs and related matters since the inception of the Canadian EOT movement.