No action will be taken against 10 Bideford councillors who voted to keep prayers at their meetings.
Members of Bideford Town Council were reported to the local authority watchdog, the Standards Board for England, by Keith Denby, from the Devon Humanists.
But yesterday the Standards Board wrote to the 10 councillors — including Bideford mayor Caroline Church — and said that no further action would be taken.
The letter stated: "Having carefully considered this allegation, we have decided to take no further action.
"This is because we do not take the view that the complaint, if proven, would amount to a breach of the Code of Conduct.
"I do not think that for a council to have prayers is a breach of any of the relevant equality legislation.
"It is rare that actions of a council overall will be a breach of the Code of Conduct by individual members.
"It is a decision for the council how it conducts its business and any change to that needs to be addressed by changing the governance arrangements with the consent of the majority of the council."
The complaint came after town councillors twice voted not to replace prayers at the start of its meetings with a short period of silence — motions put forward by Cllr Clive Bone.
Mr Denby complained that people were not given the option of leaving the room while the council said Christian prayers.
He has also argued that the council's decision to keep the prayers may breach the Equity Act 2006.
Bideford Mayor Caroline Church, in a comment on this website, said: "I get the feeling that Bideford was tried as a test case. A proposal to ban prayers from council meetings was put forward three times.
"I have to say I am very proud of my fellow councillors who would not be brow beaten into stopping prayers and stood their ground.
"We are a small Council, but a good one and I am also proud that so many local councillors work their socks off for the good of their local community and I hope will be allowed to fully concentrate on that work."
● A similar debate is taking place at North Devon Council after a complainant said prayers before meetings were discriminatory and intimidating.