But the 60-year-old member of the popular Australian band still faces a serious charge of threatening to kill, which comes with a maximum prison term of seven years. He also faces charges of possessing methamphetamine and marijuana.
Police had initially accused Rudd of trying to arrange for a hit man to carry out two killings, and had charged him with attempting to procure murder, which comes with a maximum 10-year sentence. But when prosecutors took over the case, they quickly dropped the charge.
"The file was obtained today and reviewed," Tauranga Crown Solicitor Greg Hollister-Jones said in a statement Friday, adding he had "made the decision that there was insufficient evidence to proceed with the charge of attempting to procure murder."
Rudd's lawyer, Paul Mabey, said the damage to his client had been incalculable and he was considering possible remedies.
"The charge alleging an attempt to procure murder should never have been laid," Mabey said in a statement, adding, "Mr. Ruddhas suffered unnecessary and extremely damaging publicity as a result of widespread and sensational reporting of a very serious allegation, which on any basis was never justified."
Mabey said Rudd would defend the other charges against him.
Bill Hodge, a law professor at the University of Auckland, said the events suggested police had overreached.
"Usually you'd expect police to lay a basic charge, a holding charge," he said. "Then, maybe when they've got more witnesses and evidence, they could go for a more complicated charge. I don't understand the rush."
Hodge said Rudd could have a good case for seeking financial damages if the case against him fell apart altogether, but he may have little recourse if convicted on the threatening to kill charge.
Police on Friday declined interview requests.
Fans noted Rudd's disheveled appearance and gaunt face in media images of his court appearance. Many Down Under have listened for decades to the straightforward hard rock of AC/DC, often affectionately called "Acca Dacca."
Rudd was released on bail Thursday pending a second court appearance later this month. He has yet to enter a plea.
AC/DC released a statement saying band members had "only become aware of Phil's arrest as the news was breaking."
"We have no further comment. Phil's absence will not affect the release of our new album 'Rock or Bust' and upcoming tour next year."
"Rock or Bust" is due to be released on Dec. 2 and will be the band's first new studio album in six years. The band plans to promote it during a world tour next year.
Rudd and the other members of AC/DC were inducted into the Rock and Roll Hall of Fame in 2003.
"Featuring guitarist Angus Young as their visual symbol and musical firebrand, they grew from humble origins in Australia to become an arena-filling phenomenon with worldwide popularity. They did so without gimmickry, except for Angus's schoolboy uniform, which became mandatory stage attire," said the Hall of Fame's biography.
According to the biography, Rudd first joined AC/DC in 1974, the year after it was started. Other reports indicate he left the band in 1983 but rejoined again in 1994. The Bay of Plenty Times reported that Rudd first moved to New Zealand in 1983, during the period when he had left the band, and in 2011 bought a Tauranga restaurant he named Phil's Place.
Tauranga is a tranquil coastal city of 110,000. Its warm climate has made it popular with retirees, although it now has a fast-growing younger population too.
AC/DC's albums include "Highway to Hell," ''Back in Black," and "Dirty Deeds Done Dirt Cheap."
The U.S. military has used the band's music for martial purposes. In 2004, U.S. troops blasted AC/DC's "Hell's Bells" and other rock music full volume in Fallujah, Iraq, hoping to grate on the nerves of insurgents.
AC/DC had been one of the few acts that refused to allow its music to be released digitally on iTunes. It relented in late 2012. This year, the band announced that founding member Malcolm Young, brother of Angus, was leaving due to unspecified health reasons.