Legacy ≠ Controlling Interest

In order to qualify as an Employee Ownership Trust (EOT) in Canada, the Trust must hold the controlling interest in the company. That means at a minimum, the EOT holds at least 51% of the company shares. For existing owners, this means giving up majority control. 

The Government of Canada requires this partly because there is an attractive capital gains tax exemption for sellers.The Government doesn’t want to give sellers a big tax break unless they see a true change in ownership.


Many owners feel anxious about giving up voting control over the company, especially during a time of transition. Guy Singh-Watson, the founder of Riverford Organic Farmers, experienced that same worry when he decided to sell to his employees.


“I've got four of my own children and a stepdaughter,” he said. “I do view the company as my kind of sixth child. Or maybe it's even my first child, actually, if I'm honest about it.” 

Guy recounts working very hard, sacrificing a lot, and pouring enormous amounts of effort into the company over decades. Like many business owners, his attachment is deep. “And to sell it as a sort of chattel, as if it's just an objective thing, I think, is emotionally dishonest.”

That was a major driver for Guy when he decided to sell to his employees and not an outside buyer. He wanted to protect the company and its values, and benefit the employees that had worked alongside him. But while he was ready to make a transition, he wasn’t ready to abandon the company or leave it completely to its own decisions. 

In his first transaction, Guy sold 74% of the company to the EOT: “I kept 26%, which gives you, under [UK] corporate law, a few vetoes and stuff.” He did negotiate several vetoes into the shareholder’s agreement, allowing him to maintain some control over the direction of the company while his loan was being paid out. Those vetoes remained in place until Guy’s loan was paid, and he sold the last of his shares to the EOT in 2023. 

Vetoes in the shareholder’s agreement were not Guy’s only influence in the company. Despite having sold a majority of his shares to the EOT, he retained a seat on the Board and a seat as a Trustee of the EOT. He no longer has unilateral control over the company, but his voice and advice are present and valued in its governance.


While Guy no longer owns any shares, he continues to represent the company publicly. The employees of Riverford Organic Farms are now the sole owners of the company, but it’s clear they still appreciate his wisdom and support. Says Guy: “I continue to be the sort of public face of the business. So I spend a lot of time writing and talking to journalists and giving talks and that sort of thing. I'll continue doing that for, I don't know, five or 10 years or something. I've made it very clear that when they've had enough of me, they just need to say and I won’t be hanging around.”

The governance structures of Canadian EOTs are very similar to those in the UK. Like Riverford, EOT companies have two boards: a) a Board of Directors that makes decisions about the company’s direction and future; b) a Board of Trustees made up of multiple Trustees. This Board of Trustees holds the voting rights for the EOT and is able to appoint and remove company Board Directors, along with other rights according to the shareholder’s agreement. 

Under Canadian EOT law, the seller can hold up to 40% of the seats on the company Board of Directors. So while they aren’t holding the majority of votes or the majority of seats, they are still clearly represented. The remaining seats can be held by internal or external appointments. No board seats are required to be allocated to individual employees. 

In Canada at the Trustee level, the Board of Trustees is composed of both sellers and employees. Sellers can hold no more than 40% of the Trustee seats, and employees must hold at least 30%. Often, there is also an independent Trustee who is a lawyer or professional trustee, and who is aware of all the responsibilities that need to be accounted for. In Riverford’s case, their Trustee seats included one for Guy, two independent Trustees, and two employees. In most cases, there is one seller Trustee, one independent, and one employee Trustee. 

Keep in mind that these governance structures are customizable. They should be designed after careful consideration of what goals and outcomes you have, not only for the sale of the business but for its long-term future. In many ways, founders continue to be a part of the future of the companies they’ve sold.