The director’s loan account is a record of the DRAWINGS transactions between the director and the company itself, excluding salary and dividends. At the end of each financial year this account needs to be reconciled and paid, or more tax will become due.
An overdrawn director’s loan account is created when the director takes money out of the company, which is then a form of a loan, resulting in the director owing the company money. This is not normally an issue year to year unless the company becomes insolvent. In that situation the liquidator will want the loan paid back for the benefit of the creditors. More information on this page I have found on overdrawn directors accounts in liquidation