This month, I learned that the owner of Rega Research Ltd, a UK-based hi-fi design and manufacturing business I admire, recently transferred all company shares to an Employee Ownership Trust (EOT).

EOTs are an innovative UK structure enabling businesses to transition to employee ownership. Established under the 2014 Finance Act, they provide a tax-advantaged succession option that benefits employees and local economies. Unlike selling to private equity or competitors—which can lead to job loss or relocation—EOTs promote stable business continuity, preserving a company’s values and long-term interests.

Canada lacks a direct equivalent to EOTs, though interest in similar models is growing. Employee ownership in Canada typically occurs through Employee Share Ownership Plans (ESOPs), which involve employees directly purchasing stock. However, ESOPs vary widely based on company size, tax considerations, and industry needs, making them less standardized than EOTs.

EOTs build multi-generational community assets, ensuring businesses continue to serve local economies sustainably. By focusing on long-term growth over short-term returns, they align company goals with broader community priorities such as job stability, environmental responsibility, and local investment. Many EOT businesses reinvest locally, further strengthening their role as community assets.

Another advantage of EOTs is the sense of shared purpose they create among employees. Workers become stewards of the company, fostering collaboration, innovation, and adaptability. This ownership mindset cultivates a strong internal culture that ensures long-term sustainability, even across generational changes.

EOTs also democratize wealth by providing financial stability and opportunities to employees, creating ripple effects that support families and communities. This long-term focus makes EOTs a transformative model for building sustainable, community-oriented businesses.

In its 2023 budget, the Canadian government announced plans to explore support for employee ownership, including studying EOT structures and tax incentives like those in the UK. With many small to medium-sized enterprises (SMEs) facing succession challenges as owners retire, EOTs could offer a way to keep businesses rooted in their communities. If implemented, a Canadian EOT framework could provide tax benefits and simplify employee buyouts, aligning more closely with the UK model.