Killmenow,
Let us know how the meeting goes.
I imagine that this is a huge shock to all involved - both parents and teachers, as well as students, of course.
Expect the meeting to be extremely hostile. Expect the press to be involved and the chattering classes in your local community.
Expect competitor schools to aggressively advertise for your pupils and to spread untruths about your school. Most of all, expect parents to panic and to jump.
Is there an third party company running this?
If your school is in a bad financial situation, with debts, it is unlikely that you could become a free school. The money in the pot is not there to pay off debts.
The idea behind free schools is that, ultimately, you become a state school with 30 pupils in a class. This is all the long term funding allows, although the school would be able to use voluntary contributions to reduce class sizes. If your school building cannot accommodate these enormous classes at this time, the slush fund that the school applies for is to cover any transition period (in the region of 5 years).
What you need at this stage is a true alternative to the free school (an 'independent school' scenario). Without this, you will haemorrage pupils. Although it is nice to think of getting this style of education for free, the majority of families are in your school because they want independent - and will go wherever they find this. You need the trustees to come up with a cost effective strategy that will allow you to remain open. This typically means getting rid off all the non-essential costs, and to invite those families on bursaries to start paying (or to leave). Bursaries only need to be around 5% of fee income, and you will get this by keeping on your bursary pupils who are currently in exam classes.
If the free school proposal is accepted by government, you are laughing. The characteristics of your school will change, but over a five year period. You have to think how this will impact your own children. The effect will depend on their year group. If the free school is not accepted, or the process is sluggish, this will take the toll on your school. You will lose pupils in the period of uncertainty and find it difficult to recruit new ones. There will probably be staff redundancies, and deep cuts in school services. One of the frustrating things you will find is to know when people are being straight with you, or whether they are being economical with the truth.
Good luck and please keep us posted.