The Delaware Court of Chancery on Tuesday granted expedited proceedings in a Chancery SaaS Buyback Suit accusing Semrush Holdings Inc. and its co-founder, Oleg Shchegolev, of orchestrating a stock repurchase designed to restore his majority voting control — allegedly without cost and without proper shareholder consent.

Vice Chancellor Lori W. Will fast-tracked the case after a hearing in which none of the defendants appeared, despite receiving prior notice. The court also questioned whether the matter could intersect with ongoing constitutional challenges involving Delaware’s Section 144 “safe harbor” protections currently under review by the state’s Supreme Court.

Investor Claims Founder Used Buyback to Regain Control

The lawsuit, filed October 7 by stockholder Chirag Mody, alleges that Shchegolev — Semrush’s largest shareholder — “exerted influence” to approve a $150 million stock repurchase on August 4, enabling him to regain majority control through reduced share count. The complaint claims this maneuver would otherwise have cost him $75 million if done through direct purchase.

According to Mody’s attorneys at Bernstein Litowitz Berger & Grossmann LLP, the board’s approval came without a disinterested stockholder vote, lacked transparency about which directors approved the move, and ignored safeguards meant to prevent conflicted transactions.

“A board can’t just allow a transfer of control to happen,” attorney Daniel E. Meyer told the court. “There has to be an active, independent process — and here, none appears to exist.”

Court Questions Impact of Safe Harbor Law

Vice Chancellor Will pressed Meyer on whether Delaware’s newly amended corporate safe harbor laws, under S.B. 21, could affect the case. The updated legislation extends business judgment protections to controlling stockholders even in conflicted transactions. Several Supreme Court appeals are pending over its scope and constitutionality.

“It would be helpful to see how you see this case unfolding,” Will remarked, signaling the court’s concern over how the evolving statute may shape corporate governance disputes going forward.

Semrush, valued at over $1 billion, markets itself as a “visibility management” SaaS platform supporting SEO, advertising, content, and social media analytics. The company did not respond to requests for comment.

Allegations of Fiduciary Breach and Board Complicity

Mody’s complaint accuses Shchegolev, the board, and key executives of breaching fiduciary duty both directly and derivatively. Four directors, including Shchegolev, reportedly hold Class B shares with 10 votes per share — voting power that was protected by a delayed conversion to ordinary shares under the repurchase plan.

The suit claims the board “misused Semrush’s corporate treasury to facilitate Shchegolev’s gratuitous reacquisition of control,” amounting to an insider-driven takeover masked as a corporate buyback.

While Semrush had previously “down-converted” some Class B shares in sales worth $30 million, Mody argues the new buyback sidesteps market fairness and independent review.

Broader Corporate Context: Buybacks Under Fire

The Chancery SaaS Buyback Suit echoes a growing trend of shareholder challenges targeting board-approved buybacks that shift corporate power. Another major case pending before Vice Chancellor Paul A. Fioravanti involves T-Mobile US, where a series of $27 billion stock repurchases allegedly allowed Deutsche Telekom AG to gain majority control without proper oversight.

Mody is represented by Daniel E. Meyer, Jeroen van Kwawegen, and Christopher J. Orrico of Bernstein Litowitz Berger & Grossmann LLP, alongside Douglas E. Julie and W. Scott Holleman of Julie & Holleman LLP.

Counsel for Semrush Holdings Inc. and the other defendants has yet to appear in the case.

A Test Case for Delaware’s Corporate Shield

As Delaware continues redefining the boundaries of fiduciary accountability, the Chancery SaaS Buyback Suit may become a pivotal test of how far “safe harbor” protections extend — and whether corporate boards can use repurchases as stealth vehicles for power consolidation.

In the courtroom and in the boardroom alike, all eyes are now on how far Delaware’s shield will stretch before it cracks.