Finance director Robert Peto, managing director David Smith and non-executive director Thomas Wright were accused of having failed to provide 45 days noticed for the dismissal of staff when the company was placed into administration on Christmas Eve.
The prosecution argued that the men knew redundancies would have to be made after turnaround plan, which included ploughing £25m into the company, failed two days earlier. At this point, the business secretary should have been given 45 days notice, the legal team argued.
But instead the company continued trading until Christmas Eve, with the formal notice only being sent on Boxing Day.
MPs criticised the collapse as having acted "outside the normal rules of natural justice".
However today a judge ruled that no plan to make redundancies had been formulated on 22 December, saying Peto, Smith and Wright had "every hope" of saving City Link, ITV News reports.
Mick Cash, general secretary of trade union RMT, which condemned the way it was handled at the time, said the verdict would be "a bitter pill to swallow".
“It shows the weakness of UK employment law and will send out a green light to bad bosses the length and breadth of the country to carry on treating their staff like dirt," he added.
“RMT will continue to fight for stronger laws, as recommended by the Parliamentary Inquiry into the City Link collapse, and will campaign with the wider trade union movement to protect British workers from the raw bandit capitalism laid bare at City Link last Christmas.”