The Insolvency Service, part of business secretary Vince Cable’s department for business, innovation and skills, said it was discontinuing High Court action against both former bosses at Farepak and its parent firm – European Home Retail.
Business secretary Vince Cable said he was “deeply disappointed” by the decision.
“Without doubt, we need to reflect on this result, consider what options are on the table and seek further legal advice if needed,” he added.
Lawyers representing the Insolvency Service had asked Mr Justice Peter Smith to disqualify former bosses at Farepak – and its parent firm – from being company directors. Former bosses contested the disqualification applications.
The high court judge began hearing evidence last month following the start of the trial in London.