The $10 Million Employee-Buyout Exemption Is Now Permanent. Is It Right for Your Exit?

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For most of this year, the advice to owners thinking about selling to their employees came with a clock attached. The federal $10 million capital gains exemption on sales to an employee ownership trust (EOT) was set to expire at the end of 2026. Owners were told to move fast or lose it.

The clock is gone. Bill C-30 received Royal Assent on June 18, 2026 , and EY's summary of the bill lists the amendment that makes the exemption permanent. That changes the question. It's no longer "can I get this done by December?" It's "is this the right exit for my business at all?"

Most owners have no plan, and few have heard of this option

CFIB's October 2026 succession report found that 63% of small business owners plan to leave their business within ten years . Only 6% have a formal written succession plan. Half have no plan of any kind.

Here's the part that matters for a trust. In the same research, 28% of owners say they plan to sell to employees , yet a separate CFIB survey found only 8% are familiar with EOTs. Owners like the idea of selling to the people who run the place. Very few know the mechanism that makes it work.

For first-generation Punjabi-Canadian owners in trucking, construction, the trades and retail, this lands close to home. The business was built on long hours and a small, loyal crew. The next generation often chose a different career. The outside buyer isn't always the only alternative to family. Sometimes it's the dispatcher, the site foreman or the pharmacy manager who has been there fifteen years.

What an EOT actually does

An EOT is a trust that holds the company's shares for the benefit of its employees. Employees don't write cheques. According to Corporate Knights' reporting , the trust finances the purchase, and the owner is paid back over time rather than in one lump sum. Employee-owners then share in profits.

The tax piece is the first $10 million of capital gains on a qualifying sale, which is exempt. The conditions are detailed. As originally drafted, they covered things like how long the seller had been active in the business and who could be a beneficiary of the trust, and EY's 2024 alert sets out that earlier version. Rules have been amended since, so don't plan from a summary, including this one.

The catch nobody puts in the brochure

The common advice is that an EOT is the "values-aligned" exit, a way to reward the team and keep the business independent. That's true, and it's also the soft version. The harder version is that you get paid out of the company's future profits. You're leaving the business while still depending on it.

That's a real trade. A clean sale to an outside buyer ends your exposure on closing day. An EOT doesn't. If margins thin out two years after you step back, your payments go with them. This is why an EOT suits a business with steady cash flow, a team that can run it without you, and an owner who is comfortable being a lender to the company for a while.

Timing matters too. Corporate Knights reports that these transitions take one to two years. The deadline pressure is off, but the lead time isn't.

Who should be asking the question

Owners with a stable, profitable business and managers who already run day-to-day operations.

Owners whose children or relatives don't want the business, and who don't want to sell to a competitor.

Owners for whom keeping the business Canadian-owned matters. CFIB found that 72% of owners say it does.

It's not for owners who need every dollar on closing day, or whose business only works because the owner is in the room. If that describes yours, the honest first step is making the business less dependent on you, and that's worth doing whichever exit you choose. A buyer, a trust or a family member will all pay more for a company that runs without its founder.

Key takeaways

The $10 million EOT exemption is now permanent, so there's no December rush. Only 8% of owners know the option exists, which means most conversations about succession are happening without it on the table. It's a good fit for stable businesses with a strong team and an owner who can wait to be paid. It's a poor fit if you need cash up front. Either way, start the conversation with an accountant and a lawyer a year or two before you want to be out.

If you're thinking about what comes after your business, bring the question to our Chamber. Our monthly socials are a good place to find another owner who's been through a transition, and a few honest conversations there can save a lot of paid hours later.

This is general information, not legal or financial advice. Talk to a qualified tax and legal professional before you plan a sale or set up a trust.

Sources

CFIB, "Most small business owners plan to exit their business over the next decade" (October 22, 2026)

CFIB, Succession 2026 report (PDF)

Parliament of Canada, Bill C-30, Spring Economic Update 2026 Implementation Act (Royal Assent)

EY Global Tax News, "Canada enacts federal spring economic update tax bill" (June 19, 2026)

Bennett Jones, "C$10 Million Capital Gains Exemption Made Permanent for Employee Ownership Trusts" (July 14, 2026)

EY Canada, Tax Alert 2024 No. 29 (original EOT conditions)

Corporate Knights, "Employee ownership model races the clock in Canada"