What is an Employee Ownership Trust in Canada?

An Employee Ownership Trust is a structure where a trust holds shares for the benefit of a company’s employees. In Canada, a temporary $10 million capital gains exemption can apply to qualifying sales. This model supports succession, keeps firms local, and aims to improve retention and performance while giving founders an exit path.

When is the employee ownership trust deadline for the tax break?

The temporary $10 million capital gains exemption is available for qualifying sales completed within the current window that ends after 2026. Sellers should start early, given time needed for valuation, financing, approvals, and communications. Advisors recommend building buffers so transactions close well before year-end 2026 to avoid timing risk.

How does the EOT trend affect Canada M&A?

EOT deals can shift Canada M&A toward domestic transactions and reduce sales to U.S. buyers. Valuations may anchor closer to cash flow as lenders and appraisers set terms. Advisory, legal, and lending revenues can rise with more files in diligence. Investors should track pipeline disclosures, closings, and any policy updates that affect demand.

What should investors watch through 2026?

Focus on private-market valuation marks, advisor mandate growth, lender participation, and reported closings of EOT transactions. Also monitor operational metrics after transitions, such as retention and cash conversion. Any government guidance or rule changes could influence timing, eligibility, and pricing. These signals will shape opportunities as the incentive period winds down.

Law and Government

February 12: Canada EOT Deadline Spurs Employee Buyouts, Tax Rush

ByDanny Kontos February 12, 2026February 12, 2026

On February 12, we see fast activity around employee ownership trustCanada as founders rush to close deals. The temporary $10 million capital gains exemption is a strong pull, with many sellers targeting completion before year-end 2026. This shift is moving exits away from U.S. buyers and into worker-led structures. We outline how the employee ownership trustCanada incentive works, why owners are choosing it, and what investors should watch in Canada M&A, including valuations, pipelines, and advisory revenue signals.