Step 1: Frame it by the word ‘preference’ itself:
The name signals that these shareholders are ‘preferred’, i.e. paid ahead of equity shareholders, in two specific respects.
Step 2: Name the two respects precisely:
(i) Payment of dividend at a fixed rate, in priority to equity dividend, and (ii) Return of capital in priority to equity capital at the time of winding up — these two rights together define a preference share.
Final Answer:
Shares that enjoy a preferential right, over equity shares, to a fixed dividend and to repayment of capital on winding up are called Preference Shares.