What are 'preference shares' in capital markets?

Preference shares are a class of equity that, unlike ordinary shares, come with certain preferential rights, particularly in terms of dividend payments and asset distribution upon liquidation. They typically guarantee dividend payments at a specified rate, which means preference shareholders receive their dividends before ordinary shareholders. Additionally, in the event that the company is liquidated, preference shareholders are prioritized over ordinary shareholders when it comes to any remaining assets, further establishing their preferential status.

The other options describe different concepts that do not capture the essence of preference shares. For instance, the description of a bond with guaranteed returns refers to fixed-income securities rather than equity. The notion of shares that cannot be sold for a minimum time period relates to lock-up agreements or restrictions, which do not define preference shares. Finally, although preference shares often do not carry voting rights, this alone does not encapsulate their key characteristics related to dividends and asset distribution. Hence, choosing the option defining their preferential treatment effectively captures what preference shares represent in capital markets.