Canada Moves Forward on Employee Ownership

The Trudeau government has proposed a new budget that contains an important provision to look at ways for Canada to set up employee ownership trusts following the models of US ESOPs and UK Employee Ownership Trusts. The budget states that: “Employee ownership trusts encourage employee ownership of a business, and facilitate the transition of privately owned businesses to employees. Both the United States and the United Kingdom support and encourage employee ownership through these types of arrangements. Budget 2021 announces that the government will engage with stakeholders to examine what barriers exist to the creation of employee ownership trusts in Canada, and how workers and owners of private businesses in Canada could benefit from the use of employee ownership trusts.”

Canada currently has no special tax provisions for employee ownership at the federal level. Social Capital Partners, which helped arrange the financing for the recent Taylor Guitar ESOP through the Ontario Health Plan Partners pension fund, has been working with Canadian MPs on the need for Canada to establish a program like the ones in the US and UK.

In parliamentary systems, the budget, unlike in the US, is a specific plan of action the government intends to take. While this is just a first step, it is an important step forward to introducing employee ownership in Canada.